David Jane, founder of Darwin Investment Managers, has bought back into gold and gold miners, in the view the asset bottomed at the end of last year.
By the end of 2013, the price of bullion fell below $1,200 per ounce, but recovered at the start of this year, and rose further on the back of geopolitical tensions between Russia and Ukraine last week to trade as high as $1,355.
Jane (pictured) has increased his allocation to physical gold to 3.5% of the Darwin Multi Asset fund, from less than 1%, and has also bought into gold miners as he looks to add more value plays to the portfolio.
“We bought gold because it is still a hedge on inflation and uncertainty, and it has finally stopped falling,” he said. “I did not want to have it as a hedge when it was losing me money. I am a fan of being paid for insurance, not paying for it.”
Jane invested in the Gold Bullion Securities ETF, and has bought into the largest gold mining company in the world, Barrick Gold, as well as two other precious metal miners.
“It has been a while since we owned miners, but we are trying to bring back value to the portfolio and be less sensitive to earnings surprises, as last year performance was driven by valuation, not earnings,” he said.
Despite the sell-off at the start of the year and the sharp falls in the Russian market last week, Jane still does not think emerging markets have fallen far enough to signal a buying opportunity, and maintains his zero weighting to the region.
“We do consider buying emerging markets all the time, but I would like to see news improving, not deteriorating,” he said.
“The gap between what people expect from the region and what is happening is too wide for my liking. When the gap narrows, that is when we will buy.”
He believes the turmoil in eastern Europe will lower investors’ expectations of emerging markets, causing valuations to drop significantly, which will finally create an attractive entry point.
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