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Experts remain focused on long-term benefits of gold despite price fall

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Fund managers and advisers say they remain focused on the long-term benefits of gold as an insurance policy despite the gold price having hit a two-year low early this week.

The price of gold stood at $1,380 (£899) an ounce on Tuesday after falling 13 per cent in the previous two weeks.

Speculation that Cyprus is readying for the sale of its gold reserves, combined with recent negative economic data from China, is said to have put pressure on the price.

Aberdeen Asset Management head of global strategy and asset allocation Mike Turner believes the biggest factor behind the sell-off is the fact that the yellow metal has morphed from a safe haven to “merely another risk asset”, trading more like other commodities.

He adds that “inflation rem- ains a risk, however  distant, and gold remains one of the best insurance policies against this threat”.

Investment Quorum chief investment officer Peter Lowman says while there is “pressure on the asset short term”, signs of market instability or inflation could see people return to the safe-haven asset.

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He says: “Perhaps if another round of uncertainty hits the market, people might notice gold coming back from whatever it fell to and see it as a buying opportunity.”

But Lowman warns the gold price could fall further if there is a sell-off in the ETF market.

He says: “If there was a big sell-off from the ETF market, there could be more sellers than potential buyers coming in to mop it up. So you would get the net effect of a fall in the price because there would be far more sellers than buyers.

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There is one comment at the moment, we would love to hear your opinion too.

  1. Overpriced, Overhyped from the outset. This is pure speculation not an investment.

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