He adds: “Silver is similar – it trades in currency markets the way gold does. The relationship between the two is very consistent and embedded in market psyche.
“But silver is a market that doesn’t have the depth of gold, which means the moves in both directions are accentuated.”
For those investors who do want an allocation to gold, the World Gold Council suggests holding no more than 10 per cent of the portfolio in the metal – in usual circumstances at least.
Mr Mulligan explains: “A lot of research we’ve done suggests between 2 and 10 per cent is at least an optimal allocation. But that is in fairly stable conditions, not in a negative interest rate environment where we would probably expect a higher allocation.”
Importantly, investors need to understand how gold and other precious metals behave before allocating a proportion of their portfolio to this asset.
Mr Naylor-Leyland notes: “It is something that people think they understand and, when they start digging into it, they find they don’t understand anything about it at all.
“There is a tendency for people to presume gold is a small and esoteric market with little relevance to the modern world, but the truth is the exact opposite – it is the centre of the entire financial system, hence central banks have 18 per cent of their physical reserves in it.”
Ellie Duncan is deputy features editor at Investment Adviser