Oil concerns have distracted attention from what could prove a much longer-term gold price plunge, wi...
Oil concerns have distracted attention from what could prove a much longer-term gold price plunge, with related vehicles losing nearly 20% in the last month.
Gold spot prices fell below $800 an ounce for the first time this year on Friday after reaching an all-time high of $1,030.80 in March.
The main driver of the falls is a strengthening US dollar - the currency reached a seven-month high on Friday last week, drawing speculator attention away from precious metals.
BlackRock’s £1.56bn Gold and General fund fell 19.7% over one month to 13 August, according to Morningstar.
Investec’s Global Gold offering reports an 18.7% loss over the same timescale, while S&W Global Gold fell.
New Star economist Simon Ward said gold will have a floor price dictated by fundamentals but it is hard to identify what that might be.
“The biggest question is whether this move in the dollar is a major trend higher,” he added.
“I am quite sceptical because in order to get a big and sustained dollar move, you need US rates to come up more.”
Brewin Dolphin chief strategist Mike Lenhoff said commodity prices will probably not begin to recover for at least one or two years, depending on US dollar performance.
“The dollar has been depreciating for a long time and its time may have come for a period of secular recovery,” he added.
BlackRock Gold and General is 64.5% exposed to gold-related equities, where negative reaction to plunging gold prices has contributed to the one-month losses.
Manager Graham Birch remains bullish despite recent falls, claiming the gold spot price underlying his portfolio will recover due to supply issues.
“One of the world’s largest gold companies recently estimated to us that given their analysis, global production will fall by 10%-15% over the next five years,” he said.
“This is partly due to the lack of exploration success in the industry, where only around 15m ounces were discovered last year through exploration, compared with production of around 80m ounces.
“This is obviously positive for gold prices in the long term and we would suggest that we may need a prolonged period in which the gold price is in excess of US$1,000/oz in order to stabilise or reverse this trend.”
Birch’s fund is also 15.7% exposed to platinum, the price of which fell as much as 8.5% to 10-month lows by Friday.
