Gold equities had regained their shine and prices would continue to rise as central banks were increasing their bullion supplies, according to BetaShares.
BetaShares managing director, Alex Vynokur, said investors were increasing their investment in both gold bullion and gold mining companies, as bonds were expensive and equities were fully priced.
The price of gold was rising and the gold miners involved were growing quite significantly as well, he said. Miners were lifting their dividends and there was still quite a bit of room for further growth on the back of increased physical demand.
Central banks increased their purchase of gold bullion, and as gold production was limited, prices would only continue to rise. In fact, the entire supply of gold could fill less than two Olympic sized swimming pools.
According to Montgomery Investment Management, that entire global mine supply was worth $7 trillion.
Chairman and chief investment officer, Roger Montogmery, said: “Most of the time gold was not a great asset, as it did not produce income and had no industrial use”.
His fund did not hold any positions in gold, and instead held 30 per cent of the fund in cash.
“I can think of a dozen better investments to make over the next 100 years worth $7 trillion, instead of gold. We don’t need exposure to gold to protect our investors,” he said.
However, there were times in financial markets where gold made sense as an investment, Montgomery said. This was particularly the case if one believed China would implode after its credit market unravelled, or if you considered that there were negative yields around the world.
But gold should only make up a small percentage of an investor’s portfolios at any time, he said.
Vynokur found that most investors were allocating five to 10 per cent of their portfolios toward gold. While BetaShares gold bullion exchange traded fund (ETF) and their gold miners ETF had doubled in size over the last 12 months.
Gold funds claimed two of the three top performing positions on Money Management’s Investment Centre (MMIC) on a year-to-date basis.
