Gold to reclaim record highs in 2012 - fund manager |
Date: Wednesday, October 12, 2011
Author: Reuters
Gold prices are expected to scale record highs next year as the asset's
bullish fundamentals trump the current macroeconomic uncertainty that led to a
recent selloff in the precious metal, says a commodities fund manager. The slump in gold last month has resulted in a "wash-out" of speculators in
favour of more stable long-term buyers like exchange-traded funds and central
banks, said Diego Parilla, chief investment officer of new Singapore-based
commodities hedge fund NARECO Advisors. "There has been a transfer of length between short-term speculative buyers
and long-term strategic holders, and we expect this trend to continue for
years," Parillo said in an interview with Reuters. "Central banks are looking to diversify from the once-upon-a-time risk-free
government bonds, and gold is viewed as an attractive alternative. Not so much
due to gold's own merits, but more by lack of a better choice." Spot gold has risen by nearly 17 percent so far this year, having hit a
record $1,920.20 an ounce in early September before diving by over $300. It has
since rallied to trade at around $1,670. Apart from central bank buying, gold prices are also supported by the
sovereign debt crisis in Europe, a weak dollar and the Swiss franc's diminishing
attractiveness as a safe haven after the government capped the currency's rise. "Gold is experiencing a perfect storm. The bulls could not have asked for a
more constructive chain of events. Whilst there is potentially more pain in the
short term, we expect fundamentals to remain supportive and drive prices up over
the medium to longer term," said Parilla. Parilla founded NARECO Advisors in June to invest in commodity derivatives
after spending two years as the Asian head of commodities at Bank of America
Merrill Lynch. He started his career at JP Morgan in London as a precious metals trader in
1998 and also spent four years at Goldman Sachs. He left BofA Merrill Lynch in
March this year. NARECO Advisors, which will launch its first fund later this month, is
looking to raise $500 million in three years and will invest in a range of
commodity derivatives, including energy, metals and agriculture. AGS SUPER-CYCLE Agricultural and food prices could also be at the early stages of a five-year
bull run, similar to those experienced by oil and metals in recent years,
fuelled by rising population and biofuel demand, Parilla said. Food prices, which hit a record peak in February according to the United
Nations' Food and Agriculture Organisation (FAO), are a warning that more
production is needed to meet demand, he added. "High energy prices, which are also experiencing super-cyclical pressures,
are creating additional pressures via biofuel demand," said Parilla. Food prices have fallen back in the last few months, due to investor concerns
about a global economic slowdown which may undercut demand. The actively-managed NARECO Commodity Low Vol Alpha fund aims to generate a
15 percent risk-adjusted return with a 10 percent volatility target.
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