All That Glistens - Gold Funds

Gold has been a phenomenal investment story over the last 2 years, and it continues to attract plenty of interest and investment across both instutional and retail investors.

So what are the prospects for gold in 2011? In today's FT, (http://www.ft.com/cms/s/0/ace3ea64-09ee-11e0-8b29-00144feabdc0.html#ixzz18TVuqVbX) Fredrik Nerbrand, global head of asset allocation at HSBC. “Only a marginal increase in the propensity to hold gold as an investment could have a dramatic effect on the gold price.”

One of my favourite fund managers - William Littlewood, manager of the Artemis Strategic Assets funds, prefers to gain exposure through an ETF by ETF Securities - (GBS.L) ETFS Gold Bullion Securities which has an annual management fee of 0.40%. When considered how to invest in gold, understand how the fund your are investing in looks to profit from an increase in the price of gold.

The following chart looks at 2 popular means of investing in gold:- Blackrock Gold & General and the ETFS Gold Bullion Securities Fund.

HSBC built a senario analysis for gold prices by 2020. Its model took into account the impact of expected declines in jewellery and industrial demand as a result of rising prices and the offsetting increases in scrap supply and investment interest.


The model suggests gold prices could rise to $3,305 an ounce by 2020 if fund managers increase their relative gold weightings to 0.5 per cent, even if there were no price gains for equity and bond markets over the next 10 years.

 But gold prices could reach $6,424 an ounce by 2020 under the bullish senario - a gold weighting of 0.5 per cent and 10 per cent gains for asset prices.

 Mr Nerbrand emphasised the analysis was not intended as a price forecast but as a framework for mapping out possible senarios.