Gold investors eye beta opportunities as rally rolls on

The value of gold soared 28.4% over one year to $1,532.45 as of 3 September, having increased about 20% since the beginning of June, as both central banks and global private investors have upped holdings in the face of macro concerns and the proliferation of negative-yielding debt.

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With central banks increasing their holdings to the 400-tonne mark since the beginning of the year - in the highest level of accumulation on an annual basis since they became net purchasers in 2010, according to the World Gold Council - fund managers believe gold's value could soon breach its all-time record of $1,900 an ounce in 2011.

Shamik Dhar, chief economist at BNY Mellon Investment Management, said gold could break through that high "if current levels of market uncertainty continue", with investors using it as a hedge against a "global recession" and potential inflation, in addition to UK investors hedging against sterling.

Dhar added: "Gold really only falls back in this environment if we get a sort of Goldilocks recovery with some upside surprises in growth globally next year."

Meanwhile, the Merian Gold and Silver fund is up 46.4% in the past three months alone, amid the ongoing gold rush, but manager Ned Naylor-Leyland said it is the fund's silver exposure that he hopes will offer further gains in the coming months as a result of its "explosive" beta characteristics.

He explained: "In 2011, gold was up 30% on the year, meanwhile silver went up 300%. [If the same pattern emerges], I am going to make a hell of a lot more money in silver and silver stocks, than in gold."

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Elsewhere, Rory McPherson, head of investment strategy at Psigma Investment Management, estimates investors receive two to three times the returns from owning gold miners as opposed to the physical asset.

In the three months to 3 September, for instance, the gold price was up 17% but the iShares Gold Producers ETF - which Psigma owns - had advanced by 46%.

"You do not have to have a very big allocation in terms of using up a client's portfolio to get a decent impact on returns," McPherson added.

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