The manager of the £2.7bn Investec Cautious Managed Fund said he believes the recent price fall is just a small correction and that gold will continue to impress if markets fall very significantly.
Contrarian Mundy said a falling gold price could demand a re-rating of fair value, but if the share price remained below this level, a value manager would be tempted to make further purchases.
“We worry this could be a slippery slope, particularly as there is no guarantee that gold shares will pick up on the back of a higher gold price.”
He has questioned the search for supposedly ‘uncorrelated’ assets saying in spite of the recent sell-off, many have disappointed.
“Uncorrelated assets are typically uncovered in back tests using periods when the asset class was not widely held. Unfortunately, as these assets enter the mainstream and are held by the masses, a number appear to lose their uncorrelated powers. If nothing else these are used as a ready source of cash in sell-offs, so ensuring their own demise.”
He added the US market was looking its most expensive relative to history and has as such taken a short position in US equities to take advantage of the heightened levels and expected sell-offs.