JPM’s Gregson: The headwinds and tailwinds for gold

J.P. Morgan Asset Management’s Neil Gregson, who will take over the £2bn Natural Resources fund next year, said investors “have to be alert” to the future direction of the gold price despite renewed eurozone fears prompting a recent rally.

Gregson, currently co-manager of the Natural Resources fund with Ian Henderson and manager of the Global Mining fund, said gold’s bull market had been confirmed now the spot price is rising against all major currencies including the yen and the Swiss franc.

But he warned investors should pay particular attention to where prices may move in the future.

Having started the year at $1,420 per troy ounce, the gold price hit an intraday record high of $1,920 on 6 September before shedding 20% of its value later in
the month.

But after touching a low of $1,534 on 26 September, gold has resumed its climb, culminating last week in a move back towards the $1,800 mark as the eurozone crisis put Italy in the spotlight.

Gregson described Western central banks’ reluctance to sell down their existing holdings – in contrast to the pattern seen over the past decade – as a potential sign of a peak in the price.

“Emerging market central banks’ gold purchases mean global central banks are now net buyers of gold for the first time in 21 years,” Gregson said.

But the manager highlighted the relative lack of gold reserves among emerging economies’ central banks – despite recent purchases – as a sign there was still room for more upside in the price.

“There is no alternative to gold. There are big impediments to its price falling in the shape of subdued US growth and a lack of stability in Europe.”

Gold shares accounted for 35.3% of the J.P. Morgan Natural Resources portfolio at the end of September although the precious metal had previously been over 40% of the fund.

While the fund can hold up to 10% of its portfolio in gold ETFs, Gregson said he had no exposure to trackers and would continue to try adding value through gold equities.