It’s an ever-changing landscape. That makes it interesting.

However, while it may be true that these gold mining stocks are cheap relative to their history, after some have gone through share price falls of 50 per cent or more, it is less clear when there might actually be a turnaround. Mr Hambro is only willing to commit to saying gold and gold shares are a buying opportunity in the medium term; in the short term, he concedes, anything could happen, to both the gold price and gold shares.

The main negative for gold, according to the manager, is the continuing strength of the dollar, which has a strong negative correlation to gold. If the US economy picks up, then the dollar will strengthen and gold will likely suffer.

In the marketplace, there is a battle between futures traders who are selling gold, central banks and people buying gold jewellery on the other. In fact, central banks bought up more physical gold in the first quarter of this year than at any other point since 1962. These buyers have set up an effective support level between $1,300 and $1,350 per troy ounce of gold, which is where the price has dropped to twice this year and has bounced back. Mr Hambro believes this support should continue to protect somewhat to the downside on the price.

But when it comes to gold miners, there is more work to be done. Mr Hambro has been vocal in his calls for mining companies to adopt more shareholder-friendly policies and to stem their love of loss-making exploration and production aims, but while there are improvements in the sector, they are slow in coming.

“The thing about the sector is that it is always changing – new countries opening up for investment, other countries closing themselves as a result of government change – there are exploration successes and there are companies failing, new management teams, shift in the view on commodities all the time in terms of supply and demand so it’s an ever-changing landscape to invest in and that is what makes it interesting.”

Time will tell whether the man with ‘City DNA’ in his blood will be proved right in his belief that gold will have its day once again or whether he has just been seduced, like many others, by the shiny yellow metal.



Managing director, chief investment officer of the natural resources equity team and portfolio manager of BGF World Mining, BGF World Gold, BlackRock Gold and General and BlackRock World Mining funds (includes years at Mercury Asset Management and Merrill Lynch Investment Management, which merged with BlackRock in 2006)