Haig Bathgate discusses why he will be avoiding 'tactical' gold bets in Citywire, despite the precious metal shedding around a third of its value in six months.
When tightening hits, Haig said he fully expects to make strategic bets to capitalise on short-term pullbacks, however bullion will not be one of them.
Year-to-date, figures from Nomura show that gold's price has dropped by 23% to $1,286, and fallen by close to a third over six months.
'We still assess that despite losing one third of its value in six months the precious metal is an unattractive investment with questionable fundamental value - it's up 30.8% over the past five years,' Haig argued.
'We fully expect some decline for equities when tightening comes, and we may use tactical investments to take advantage of any short-term dip, but gold will not be one of them.'
Dismissing its five-year gains, Haig said that gold's five-year rise was driven by investors' fear that western governments would default, bolstered by the fact AAA-sovereigns yielded practically nothing, so there was no threat of losing income by buying into bullion.
'The prospect of an economic normalisation with increased interest rates sets the scene for a higher-yielding environment.
'The opportunity cost of holding onto gold will be significant, and its value is likely to drop as a result.'
This article can be found on Citywire.
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