The price of gold has surged to another all-time high in the wake of the ongoing crisis in North Africa, but Alpha Manager Tom Winnifrith, who manages SF t1ps Smaller Companies Gold, believes the idea that people are seeking the commodity as a safe haven is wrong.
"Gold prices have only been driven by the Middle East in the last two weeks or so," he said. "It has gone from $800 an ounce to $1,400 in the six months prior to the unrest because of the extraordinary global economic situation."
The fund manager believes that it is the policies of Western economies and not geopolitical unrest that is pushing prices ever higher.
"People are ignoring the fact that uprisings began in the Middle East because of bread riots and rising inflation, not because of despotic rulers. This was a direct result of quantitative easing," he added. "The inflation genie is out of the bottle, which will have a lasting effect, not just on gold but on economies as a whole. The situation is not being helped by the printing of money in the UK and US to bring currency in line with Asian currencies." Richard Davis, who is a portfolio manager within BlackRock’s natural resources equity team, agrees that gold is being driven by more than civil unrest.
"Medium-term factors, such as investor concern about the global recovery, currency volatility, and the increasing pricing power and size of the emerging-market consumer, will continue to drive demand for gold over the medium term," he said.