City Financial head of multi asset Mark Harris has increased his exposure to both gold and gold miners.
Harris has gone from holding no gold at all to holding nearly 10 per cent of his portfolio in gold, increasing exposure through an exchange-traded fund and with 4 per cent in gold equities via the iShares Gold Producers Ucits fund.
Harris believes the worst is over now that gold has dropped to a price per ounce of $1,223.90 (£746) as of 9 January.
Harris says: “We may have seen the worst in downside momentum for most commodities. We now believe gold has seen the worst of its setback and we have increased exposure.”
Harris believes the equity bull run will not continue and is using his gold exposure as a hedge. But he is aware how gold has suffered and admits he would have gone for a different hedge had he been able to find a less volatile option.
Harris says: “I have to say it gives me an obvious sense of unease. It is not the perfect hedge.
“I am worried about risks in the market but this is still a good way to hedge. It would not surprise me if equities suffered a correction in Q1.”
Chelsea Financial Services managing director Darius McDermott says: “It is a brave call. Not wrong, but brave. I have had some gold so I know it can be painful to hold it. But right now there is valuation support.
“If gold goes up then we will see substantial rewritings of gold equities. There are now low cost producers and we could see some mergers and acquisitions activity. But you do have to treat gold and gold equities differently.”