Sheltering in gold is back on the table for fund managers who believe that global markets have yet to react fully to new geopolitical issues.
Political risk and rising armed conflicts tend to spook investors and drive them to perceived safe havens, which often include precious metals.
But in spite of several ongoing issues at the moment, the gold price is broadly flat in the past year, having been rangebound between the $1,400 per troy ounce mark and $1,200. This has prompted investors to consider upping their exposure in anticipation of a surge.
David Hambidge, head of multi-asset at Premier Asset Management, does not hold any gold but is watching it closely. “We have a gut feeling that there is a little more weakness in gold prices,” he said.
“They should bottom out soon and that will be a good entry point. I wouldn’t dissuade anyone from buying or holding a bit of gold at the moment and we are certainly not a million miles away from it.”
Tom Becket, chief investment officer at Psigma Investment Management, suggested investors jump into gold as it is “poised for gains”.
And JPMorgan Asset Management’s natural resources manager, Neil Gregson, said the increase in the gold price in the past week was as good as could have been expected.
Adviser Alan Steel, managing director of Alan Steel Asset Management, said he had spotted what he perceived to be an opportunity and has moved some of his pension fund into the £1.2bn BlackRock Gold & General fund, calling it a good “contrarian bet”.
“There are signs we have entered the inflationary phase of the business cycle,” he said. “Plus, gold shares had reached a 71-year low, pessimism on commodities was at extreme levels and oddly enough, global growth is perking up.”
He also alluded to high stock prices across many indices and the fear that bourses could suffer a strong correction. “If this well-publicised stockmarket correction does come along, history shows gold is a good place to be,” he said.
A survey by BullionVault, the physical gold and silver market for private investors, shows that 18 per cent of investors believe geopolitical factors have the biggest influence on the gold price.
Adrian Ash, head of research at BullionVault, said: “For many investors gold is a form of financial insurance. When there is a civil or world unrest, gold could be seen as an insurance policy to have; and the cost of insurance is of course much higher when you need it.”
Franz Wenzel, a senior strategist at Axa Investment Managers, thinks other investors will follow Mr Steel’s lead and “rediscover gold as a safe haven” if the heightened geopolitical uncertainty continues.
However, he said he would be unlikely to invest himself, calling US Treasuries the “only real safe haven”.
“Gold has a Janus head — two faces, one being a commodity and the other a safe haven,” he said.
In search of a glittering opportunity
It seems a growing number of managers are eyeing gold as a potential source of returns with many other asset classes near or at full value.
Funds that invest in gold or gold-related equities have struggled in recent years, with some of the most prominent sustaining hefty losses in the past seven, five and three years, according to data from FE Analytics.
But looking at one-year data, several gold funds’ losses are negligible and the Smith & Williamson Global Gold & Resources fund is up 4 per cent in the past year.
Not only that, but Evy Hambro’s BlackRock Gold & General fund has seen its size begin to rise again after a sustained fall from £3bn in 2011 down to less than £1bn in January this year.
Last week it had almost reached £1.2bn.
Back in April 2011, HSBC Global Asset Management – the custodian for SPDR Gold Trust, the world’s largest gold ETF – set a target sell price for the asset class of $2,600 an ounce.
Among those keen on gold are Troy Asset Management’s £2.4bn Trojan fund managers, Sebastian Lyon and Sean Beck. The pair have an 11 per cent weighting in gold – their top holding is an 8.6 per cent position in Gold Bullion Securities – and 3 per cent in gold shares.
The managers have returned 166 per cent since launch in May 2001 against a peer group average of 63.5 per cent, according to the latest factsheet.
Given that political tensions have ramped up in recent months, and that the prospects for inflation – which some say gold protects against – look greater, perhaps the metal could be about to gleam again.
