Fund firms issue gold warning

Skandia, Fidelity Worldwide Investment and Eden Financial have warned investors that they do not feel gold is a safe haven asset.

Gold is skirting a bear market with gold futures trading at close to $1,593 an ounce on May 21 – a 15% drop from a high of $1,881 on August 29.

Ryan Hughes, head of multi-manager at Skandia, who oversees £4 billion in the firm’s multi-manager range, says: “Gold is a dangerous asset for people who are buying it with the expectation it will be a hedge for the equity market. We have seen an increasing correlation between gold and equities this year.”

Trevor Greetham, director of asset allocation at Fidelity Worldwide Investment, who oversees the firm’s multi-asset portfolios, including the £619m Fidelity Multi-Asset Strategic fund, cut the portfolios’ gold exposure to zero over the first few months of the year.

Speaking at the Fidelity FundsNetwork Investment Forum last week, he said: “Gold may be the best of the commodities in a slowdown, but it was the best of the commodities in 2008 before it fell 30%, while the rest of the commodities fell 60%. So I would be a bit nervous about the idea that gold is automatically great at a time like this.” (article continues below)

Mark Harris, fund manager at Eden Financial, says: “Gold looks to have lost its way. It is yet to be determined if more quantitative easing and further European strife is going to get the rally going again.”