Jupiter's Gibbs sells down gold as prices plummet

Philip Gibbs effectively sold out of his gold positions within the Jupiter Absolute Return fund in September, a month which saw the precious metal lose 15% of its value.

Having more than doubled his gold holdings to 11% of the £651m portfolio in August, Gibbs reduced his exposure to just 0.94% last month amid a heavy sell-off for the precious metal.

Having reached a high of $1,920 an ounce on 6 September, the price of gold had fallen to $1,623 by the end of the month, the drop being punctuated by wild intra-day price movements and speculation investors were being forced to sell gold to cover liquidity issues elsewhere.

Gibbs held 8% of his £656m portfolio in ETF Securities' Physical Gold ETF in August before cutting the weighting to 0.8% by the end of last month, according to his latest factsheet. A 3% position in the Source Physical Gold ETF was also significantly sold down.

The gold price has been range-bound in October as equity markets recover ground and is currently trading at $1,656 an ounce.

The manager had previously described his gold positions as a play on governments' use of currency debasement as a "tacit strategy for dealing with fiscal imbalances", and he remains cautious in his outlook for the world economy.

"In our view, it will take a significant and coordinated effort by the world's major central banks to reverse the global economic slowdown. However, this is an approach for which there appears little appetite", said Gibbs, who will step back from his responsibilities on Jupiter's financial portfolios at the end of October.

Elsewhere, the manager is continuing to position his fund to profit from countries' relative fiscal strength: at 16% of the portfolio, Gibbs' largest long positions are in AAA-rated Australian government bonds, and he is also maintaining a 10% short in Japanese government bonds.

On Europe, Gibbs said the proposed expansion of the European Financial Stability Facility and recapitalisation of eurozone banks were palliative measures that would at best lessen the effects of potential debt defaults rather than enabling growth to resume.

He has increased his short position on the euro from 10% to 16% - though it was as high as 30% earlier in the summer - and remains short European cyclical stocks.

Against this, he continues to favour the Norwegian krone, pointing out the currency has failed to appreciate against the euro over the past decade despite Norway's fiscal strength.

Gibbs is also running a tactical 13% long position in the US dollar, reflecting his concerns over risk assets.

"Price risk in asset markets remains very high. We continue to be cautious", he said.

A downturn in global sentiment has produced an uptick in the performance of the Absolute Return fund, which has returned 1.6% in the three months to 14 October versus an average loss of 2% for the IMA Absolute Return sector, according to Morningstar. Over one year it has lost 0.1% against an average return of 0.2%.