“I would buy gold at almost any price “
UK’s top gold fund manager: ‘I see gold’s strong trend continuing’
Leading gold fund manager Evy Hambro on why he doesn’t expect the bullion price to fall.
By Emma Wall
01 Mar 2012
Gold has emerged as one of the few winners from the financial crisis. Turbulence across markets globally and returns of next to nothing on cash over the past two years saw investors pour money into bullion. As a result, the gold price soared and Evy Hambro’s BlackRock Gold & General fund saw inflows of nearly £1.5bn in the past 24 months alone, bolstering the fund to £3.4bn.
The best performing commodities manager tells us the gold rally is far from over.
What is your current market outlook?
The year has started with moderately more appetite for risk across markets. However, there will no doubt be many twists and turns in the coming months and gold appears attractive as a hedge against many of these potential pot holes. The reasons for owning gold, therefore – as an alternative store of value, an alternative currency, a potential safeguard against inflation, a source of diversification – appear as relevant now as they did throughout much of 2011. Moreover, a negative real interest rate environment, such as the one most major economies are in and which looks set to persist, is typically an accommodative one for gold.
What’s next for the gold price?
Long-term fundamentals in the gold market appear supportive of prices, driven by constrained supply and rising demand. Gold mine supply was effectively flat from 2001 to 2010, despite the huge increase in the gold price over that period, as falling discovery rates and grades created, among other factors, significant challenges to production growth. Mine production expanded by 3.8pc in 2011, but set against a gold price which averaged 28pc higher in 2011 than in 2010 that is a modest figure. Constraints on increasing this production base further remain, one of which is the relative lack of exploration success for gold. Central bank activity has also been a noteworthy contributor to gold’s strength and to the supportive outlook for the metal: last year central banks bought more gold than in any year since 1964.
Over the past two years, the official sector has reversed a steady selling pattern into a buying one – in 2010 net purchases from central banks stood at 77 tons, in 2011 that figure rose to 440 tons. This is a highly supportive trend for gold demand and one that has some longevity in our view.