Gold News

Gold investment 'to remain strong' on safe-haven qualities

The head of research at a major exchange-traded funds firm claimed yesterday (November 28th) that gold investment will continue to be strong, even in a deflationary environment, the FT reports.

Gold is traditionally favoured by investors for its safe-haven status and is often bought as a hedge against inflation, which saw the price of the yellow metal break the $1,000 per oz barrier in March.

The gold price has since tailed off and some commentators have predicted that it will suffer further as investors close off their short positions and deflation takes over in the coming months.

However, Nicholas Brooks, of London-based ETF Securities, told the FT: "Gold continues to attract strong investor interest given its safe-haven, US dollar hedge and portfolio diversification qualities.

"If we went into deflation I think there would be incentives to hold gold as you'll see further financial dislocation and the safe-haven nature of gold would come to the fore."

Mr. Brooks' comments about the benefits of using gold investment as a portfolio diversifier have also been echoed by Jane Sydenham, investment director at Rathbones, which manages around £11 billion worth of funds.

She explained that her company recommends having around five per cent of a portfolio made up through gold.

"In most of our portfolios, we have some sort of exposure to gold, partly because it is very unclear at the moment whether or not we will go into deflation or whether inflation will pick up again in a couple of years' time," she told the FT.

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