Evy Hambro: Gold to remain near highs in 2011

BlackRock Gold & General  fund manager Evy Hambro expects gold to range trade near to recent highs in 2011 despite the precious metal being some 15% off recent record highs in the last quarter of 2010.

With gold off its peak but still near to recent highs, Citywire Selection-listed Hambro expects that as 2011 progresses there might be a pause in overall sector gains for gold and predicts that the precious metal will continue to range trade.

‘Going into 2011 the portfolios are set up exactly as they were but there may be a pause in the sector in terms of absolute gains,’ he told Citywire.

However, Hambro expects the gold investment theme to remain on investors’ minds and he sees support for its price continuing as central banks continue to buy up gold as an insurance policy as it maintains its safe haven status. He has been buying physical gold ETF exposure too.

Hambro points to recent research that shows that despite near record prices, in terms of capacity issues the precious metal has a long way to run. Even today, after  the gold rally had reached the 10-year high mark, the metal represents a mere 0.6% of total global financial assets. This is near the all-time low, 0.3%, reached in 2001 and significantly below the 3% it accounted for in 1980.

While the Gold & General fund made a positive return of 42% in the year, Hambro says it is too early to predict how it will perform in 2011. ‘It will come down to the gold price but it is well supported by the fundamentals and if the price averages around current levels we should do well.’

The fund’s long term bias to mid and smaller cap gold stocks led it to outperform in the second half of 2010 as larger producers continued to struggle to maintain margins.

Citywire Selection pick Hambro – who also manages the BlackRock World Mining investment trust – has run the portfolios with the mid cap bias for some time on a view that large cap gold producers will find it difficult to produce sufficient gold to maintain their growth margins.

Hambro told Citywire Wealth Manager: ‘We have held mid cap stocks as a long-term style bias as they are able to produce higher growth and higher margins. We have felt that the gold sector has been short of growth assets.’