Henderson's Harris dismisses gold 'bubble' fears

Henderson head of multi-manager Mark Harris remains bullish on the long-term prospects for gold and believes ‘undervalued’ miners will be the biggest beneficiaries.

He also dismissed fears that a bubble was forming in the asset class as investors piled into the precious metal on fears QE2 will eventually result in higher inflation. The the gold price edged past $1,400 an ounce for the first time earlier this week.

Harris says: "In my opinion gold has yet to go into bubble territory, although it is certainly a candidate for such, given the difficulties in valuing it.

"Whilst it is a little overbought short-term, it has yet to go up by the multiples we have witnessed in previous bubbles.

"It has outperformed for nearly 10 years and is becoming increasingly popular, but still most investors have very meagre weightings."

Harris has exposure to gold shares across his MM range, through the BlackRock Gold & General and Earth Gold funds.

"Stocks offer a leveraged way of playing the longer run positives for gold and additionally look undervalued relative to the price of physical gold," he adds.

"So we are maintaining our weightings, but have to accept some shorter-term volatility."