Gregson has cut the number of holdings in gold equities within the £2 billion Natural Resources fund, maintaining positions in junior explorers and senior producers but selling out of mid-tier companies.
“One example is gold mining company Petropavlovsk, which we sold at £7-8 in February and which is now at £4.70,” says Gregson.
“The gold price has fallen from $1,900 (£1,174) to $1,634 since August and we feel headwinds will continue to build, but this was very much a macro call.
“As the US recovers, at some point the Fed will think about raising interest rates, which will drive some money out of gold from American and Canadian investors.”
Gregson says gold shares became so cheap it was difficult to sell down any further. However, he is comfortable maintaining the current 25% allocation for now.
He adds: “There will still be periods when there is interest in gold. There are elections coming up and as the issues in the eurozone play out this may encourage gold [buying], plus the central banks are still buying it. (article continues below)
“If the recovery in the US rolls over, they will think about further QE which would be positive for gold.
“If there is an orderly global recovery, we would expect the gold weighting to come down further, but we are holding at the moment as it is far too cheap.”
Meanwhile, a commodities note by Capital Economics says gold is likely to reach $2,200 by the end of this year if any countries leave the eurozone.
“Our central scenario is that the global economy remains weak and vulnerable to financial shocks, the most important of which is the potential exit of one or more small countries from the eurozone,” according to Julian Jessop, chief global economist.
“In this scenario, the break-up is relatively orderly and the US economy remains relatively strong, supporting the dollar and deterring the Fed from further quantitative easing. But gold is still likely to benefit from safe haven demand and the continuation of ultra-loose monetary policy, including the US, with prices rising to $2,200.”