The majority of discretionary fund managers have a low exposure to gold despite its reputation as a safe haven during times of economic and geopolitical uncertainty, new data reveals.
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Asset Risk Consultants (ARC) found roughly 75 per cent of managers have either no exposure to gold, or that it counts for less than 2.5 per cent of their portfolio. No manager had an exposure level over 10 per cent.
This is despite the fact that the price of gold has risen by around 570 per cent since 2003, albeit with significant volatility. World equities have delivered a return of 610 per cent over the same period.
Gold is widely seen as an inflation hedge and has enjoyed a year of record-breaking prices amid geopolitical uncertainty across Europe and the Middle East.
Graham Harrison, chairman at ARC, noted: ‘The lack of gold exposure in portfolios today cannot be explained away by managers being negative on forecast returns for gold over the short to medium term. Indeed, net sentiment towards gold was strongly positive, at +35 per cent in our latest survey.
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‘However, an investigation of the changes in net sentiment over time reveals a strong correlation with the performance of gold over the previous 12-month period. Sentiment was at its most negative in the period 2012-2014 and has tended to be positive when gold price momentum has been positive.’
Gold prices surged to an all-time high in July, gaining 1.7 per cent to reach $2,465/oz, eclipsing the previous record struck in May.
In a forecast shared earlier this year, Gregory Shearer, head of base and precious metals strategy at J.P. Morgan noted the bank remains ‘structurally bullish’ on gold over the next year. He added: ‘However, with its surge directionality aligned with our bullish targets but trading ahead of our forecasts, the focus now shifts to its staying power.’
