Gold Investing does not offer a "safe haven" from financial turmoil, and is in fact "almost like" a Ponzi Scheme, a UK fund manager has said.
"You never know what [gold]'s going to do," warns Gary Reynolds – director, chief investment officer and co-founder of Courtiers in Henley-on-Thames, Oxfordshire – quoted by professional-investor magazine Portfolio Adviser.
Comparing the path of Gold Investing prices against the MSCI World Index of listed stocks, "Over the past 10 years equities have generally fared pretty poorly," says Reynolds.
"If we were ever going to see a truly negative correlation between these two assets it would have been then."
Reynolds' comment that "Portraying gold as a risk diversifier is dangerous" (as Portfolio Adviser puts it) comes after market-development organization the World Gold Council issued a new research report last week, showing how investing 3.3% to 7.5% of a diversified portfolio in gold can reduce the risk of sharp losses and improve risk-adjusted returns.
But "the one moment you really want your more secure asset to fight for you and be a diversifier, it doesn't," counters Reynolds, pointing to the 30% loss on US Dollar Gold Investments during the Lehman Brothers crisis of late 2008.
"So what is the point in holding it?"
Courtier's three managed funds charge investors up to 5% in initial fees, plus 1.6% or more in annual charges, according to MorningStar.
Currently holding £220 million in assets between them ($353m), all three funds have lagged their benchmarks in three of the last four years, says MorningStar. Each fund now stands below its launch valuation of 2007.
Since then, the Gold Price has risen 214% for UK investors and gained 158% against the US Dollar.
"[Gold] is almost like a Ponzi scheme," reckons Reynolds, "which demands more and more investors coming in to keep the price up there."
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