Gold miners remain under pricing pressures in spite of the recent rally in the gold price, according to JPMorgan Asset Management.
James Sutton, a client portfolio manager working on the JPMorgan Natural Resources fund, said the price of gold had bounced in recent weeks as investors sought a temporary safe haven from declining emerging markets.
But he warned that investors “should be careful about assuming the recent bounce in gold prices changes the fundamental outlook”.
“Gold can be a valid hedge against extreme tail risks, but unlike classic commodities, it doesn’t have an intrinsic value,” Mr Sutton said. “It doesn’t come with a cashflow, it has little economic use and it is not tied to global consumption.
“Historically holding gold has been a good way to hedge against depreciation of the dollar. However, with the Federal Reserve tapering, US interest rates and the dollar are going to be volatile. That leaves gold vulnerable. By itself without proper diversification, it’s an expensive insurance policy that only provides limited coverage.”
The price of gold has fallen 24 per cent in 12 months, from $1,648 per troy ounce to $1,252 per troy ounce. However, since the start of 2014 it has bounced, gaining 4 per cent since January 1.