Investors should not take it for granted that inflation will rise from here, but whatever the direction of markets, gold is a prudent investment right now, according to Bill McQuaker, multi asset investment manager at Fidelity.
Mr McQuaker was speaking at the Dynamic Planner annual conference in London on 31 January.
He said the recent steep rise in US government bond yields, with the ten year Treasury now yielding above 10 per cent, is a sign the market is forecasting much higher inflation, but he is sceptical this will happen.
Mr McQuaker said: “There is a battle between cyclical forces, which would point to higher inflation, such as improved economic growth and tax cuts in the US, and structural forces which could stop it happening, such as technological change and ageing populations, which are deflationary.
"In 2011, this battle happened, people declared the end of the bond bull market and said the place to be was value stocks. But the structural changes won, bond yields kept falling as inflation didn’t rise, and the same happened in 2015.
"Will it happen again now? I don’t know, but I think gold is an asset that can do well whatever the market conditions.”
He said in the event inflation rises, gold can do well as a hedge against that, as it is a store of value.
Similarly he said if things were to go wrong for the global economy, "it is likely that politics will be behind that, and at times of political uncertainty gold tends to perform well”.
He said if inflation does rise from here, the US technology companies that have enjoyed strong share price performance in recent years will be among the biggest losers, while the banks will be beneficiaries.
Alan McIntosh, chief investment strategist at Quilter Cheviot said anyone who had studied economics in the decades prior to the financial crisis would have been taught to expect that quantitative easing would have led to higher inflation.
However in economies such as the US and the UK inflation has remained subdued in the ten years since the financial crisis, and is only now beginning to increase.
Alastair Mundy, who runs the £1bn Investec Special Situations fund fully expects inflation to rise sharply in the coming years, and has positioned his portfolio for this by buying gold.
Speaking at the same conference, Mr Mundy said the central bank policies of quantitative easing have pumped trillions of pounds into the financial system, “and the central bankers are patting themselves on the back, they think they have solved the problems from the global financial crisis, but the truth is they have only done the first half of the job".
"They have put the money into the system, now they have to take it back out, if they do that properly then they can say they have done well and I was wrong.
"But if putting all that money into the system has pumped asset prices up and kept a lid on inflation, lets see what happens when they take it out of the system.”