Troy's Lyon hits out at gold doomsayers

Troy Asset Management's Sebastian Lyon continues to back gold despite a sharp correction in the asset class in September.

The manager of the £1.4bn Trojan fund said the sudden downward movement was not a surprise but "exacerbated by those wishing to call the top".

Gold fell from a peak of $1,921 per troy ounce at the beginning of the month to as low as $1,532. The metal ended the month at $1,652.

Lyon said: "Such corrections should not be a surprise. We warned in the January that: 'In the short term the actions of myopic traders may cause sharp movements in the gold price...however over the long term their actions are likely to be inconsequential when compared to the fundamentals of negative real interest rates and money printing.'"

Lyon has been steadily increasing his exposure to gold bullion and securities over the past year and by August the fund had 13% in gold and 5% in gold shares.

Gold jumped 35% in US dollar terms before the falls in September, he said, and added it was inevitable the price would be hit like other asset classes after such a strong rise.

"In a world where losses have been incurred elsewhere, investors were bound to take profits and lock in gains sooner or later. Volatility may be exacerbated by those wishing to call the top.

"With unseemly haste, many commentators have rushed to administer the last rites on a ten-year bull market in bullion. We note many of these ‘experts' have never recommended it. We ignore such prognostications."

However, his latest factsheet for September reveals he has slightly reduced exposure to bullion, bringing it down to 12% while cash has moved up from 25.7% to 27.1%.