Investment managers have branded Goldman Sachs' recent call to short gold as "stupid" and "irresponsible", as many predict the yellow metal has further to run or will at least revert back to offering safe-haven characteristics in times of market stress.
Last week, Goldman Sachs analysts released a note arguing the recent rally in gold, one of the best performing asset classes over the past quarter – up nearly 12%, had been overdone and urging investors to short the commodity.
"Fears around China, oil and negative interest rates have likely been overstated in the gold price and other financial markets," the note said.
"We are recommending shorting gold through a GSCI-style rolling index," it said, referring to the S&P GSCI commodity index, according to Reuters.
However, fund managers have responded by saying they would not recommend taking a short position in an environment of central bank uncertainty and market turbulence.
Richard Scott, senior fund manager at Hawksmoor IM, said: "Goldman Sachs is at least being consistent in its calls, they are all based on a rosy outlook for the world economy, but it is far from given gold will go down.
"There is significant risk of difficult periods ahead where people doubt central banks. It could get worse before it gets better, and then the gold price will rally.
"It is very irresponsible of them in the current market environment; it is like telling people to cancel their car insurance because they will not have a crash."
Clive Hale, managing director at Albemarle Street Partners, added: "If Goldmans say short it, then it is a raging buy. Gold is an insurance policy against central bank stupidity. I would describe it as a zero coupon irredeemable bond with zero credit risk, where the issuer is God."
Gold has traditionally been used as a safe-haven asset and inflation hedge, but last year the precious metal failed to live up to this status.
As investors worried about the Greek crisis, they chose to back safe-haven currencies instead of gold, which was also impacted by wider price falls across the commodities sector.
However, 2016 has been a different story. While global equities have been in turmoil, gold prices have been steadily rising, hitting a high of $1,241 per ounce in early February from a low of $1,086 per ounce on 3 August last year.
Source ETFs reported its Physical Gold P-ETC saw record demand in January, with $300m of flows in one month, compared to $250m for the whole of 2015, while EPFR said gold funds also attracted $1bn of inflows in the first week of February.
Old Mutual Global Investors has already tapped into this demand with the planned launch of a Gold & Silver fund next month.
Goldman Sachs is at least being consistent in its calls, they are all based on a rosy outlook for the world economy, but it is far from given gold will go down.
Despite the recent rise, Henderson's head of multi-manager Bill McQuaker said "now is a good time to invest" as risk appetite is under pressure, while Solomon Nevins, senior investment manager at Architas, said the team has been adding "limited exposure".
Ryan Hughes, fund manager at Apollo Asset Management, is also looking to add to gold on future price weakness.
McQuaker said there is increasing demand for effective hedges in these difficult markets, and gold offers this quality, as well as diversification from major currencies.
Also, as markets are starting to think the US is nearing the end of its current tightening cycle, the dollar will weaken and historically, this has also been helpful to the gold price.
"My suspicion is that gold will continue to be an effective protector of real purchasing power in the years to come," he said.
Architas' Nevins said the negative interest rate policies adopted by various global central banks are another reason to consider gold.
"An allocation to gold protects against the risk that the negative interest rates become more widespread. In recent weeks, we have seen a loss of faith in the ability of central banks to stimulate growth through loose monetary policy. Japan was a prime example of this."
Hughes added his funds have had no exposure to gold this year, but he expects strong performance for the precious metal to pause for breath, creating opportunities.
An allocation to gold protects against the risk that the negative interest rates become more widespread.
ETFs vs funds
Some managers have highlighted accessing gold price rises through ETFs as a more "predictable way to invest" in this environment than actively-managed gold funds or shares.
McQuaker, who has 3.7% in gold in his Multi-Manager Income & Growth fund, commented: "I expect ETFs will properly capture the benefits described above. Gold shares are much more volatile as their performance reflects the financial and operational leverage inherent in gold companies' profit and loss and balance sheets, as well as the prevailing sentiment in the stockmarket."
However, Scott and Hale both prefer active fund exposure and named Ruffer Gold, BlackRock Gold & General and the Smith & Williamson Global Gold and Resources funds as their top picks.
Hale, in particular, is averse to using gold ETFs: "Do not use ETFs unless you can be absolutely sure the gold is in the vaults in allocated form. Gold funds are geared plays on the gold price and I, for one, will be buying on any weakness in the gold price."
Gold shares are much more volatile as their performance reflects the financial and operational leverage inherent in gold companies' profit and loss and balance sheets.
Despite the array of options for gold exposure, some managers are choosing to avoid the asset class, although they would not go as far as establishing short positions.
David Coombs, head of multi-asset investments at Rathbones, said he would rather hold the dollar than gold in his portfolios as the latter is due to correct.
"The dollar adds more to my portfolio plus it yields at least something more than gold, which can be held for five years and do absolute nothing for you, or worse lose you money."
Meanwhile, Mark Harris, multi-asset manager at City Financial, said the gold price has run ahead of itself. "I would see a correction as appropriate. The jury is out, but I think it looks overbought and overdone," he said.
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