City Financial’s Mark Harris has added to his gold exposure on the belief that the precious metal has “seen the worst of its setback”.
Mr Harris has been adding to gold since the start of the year but has increased this position in recent weeks as he has become more concerned about valuations in other areas of the market.
“We may have seen the worst in downside momentum for most commodities,” he said. “The drought in Brazil has focused attention on soft commodities such as coffee and we are seeing some interesting demand and supply developments in other soft commodities. This is certainly an area to watch.
“It is our belief that an elevated sense of certainty and concomitant optimism continues to leave many equities, bonds and currencies highly sensitive to surprises.
“However, it is noticeable that a wide constituency of hedge funds have adopted more cautious positioning after January’s testing conditions.
In spite of these valuation concerns Mr Harris highlighted “attractive” areas such as Europe and in particular emerging markets, as outflows continue.
He said: “We will see more differentiated performance in emerging markets as the individual drivers of performance become clearer. Flows out of emerging markets are getting to panic, ‘Lehman’-type levels. This type of liquidation panic combined with improving earnings offers opportunity.”
