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Jupiter’s Chatfeild-Roberts: gold could become a bubble

Jupiter chief investment officer John Chatfeild-Roberts says physical gold as an asset class could become a bubble.

Jupiter’s Merlin range has exposure to gold through a gold exchange-traded fund from ETF securities.

Gold has made recent gains on the back of risk aversion in the market and quantitative easing, which devalues currencies and pushes investors towards holding gold as a store of wealth. On 20 September, it was trading at $1,763 an ounce.

Chatfeild-Roberts says: “My expectation is that at some stage gold could become a bubble. We would want to exit it by that point.”

He says identifying that gold is entering bubble territory can be done by looking at the shape of the price. “The price moving up sharply like the shape of a hockey stick on a logarithmic scale can be seen as bubble territory,” he says.

But Thames River co-head of multi-manager Robert Burdett says: “I do not see gold in bubble territory at the moment.

“Gold bottomed out a few months ago and now is rising in line with equities and government bonds are falling. So it has become more interesting than it has been in the past.”

Burdett says as concern is around inflation at the moment compared with deflation previously, gold looks attractive as an inflation hedge.

City Asset Management head of research James Calder says the gold price is not currently showing signs of entering bubble territory.

But he adds: “Anything can become a bubble at some point though. The weakening dollar will push up the gold price and will make physical gold ETFs more attractive over gold equities as ETFs are more closely aligned to the price than equities.”

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