Gold rush for ‘safe haven’ – fine wine offers comparative option for investors

Peter ShakeshaftGold’s month on month performance has dropped off for the first time this year following first quarter sustained demand, most likely as a response to the falling US dollar, concerns over rising inflation and an increasingly tense geopolitical scene.

Gold’s spot price today stands at $1,288, up 8.5% year to date in Sterling. ETF Securities reported today that Gold ETFs stand at £433M year to date, more than the equity ETFs. Source, a competitor provider, has seen its $4bn Physical Gold ETF take in more than $500M this year so far.

Marcus Brookes from Schroders expects US inflation to rise further along with political uncertainty and that gold positions “make an awful lot of sense”. He claims to have increased his gold position to 6% of their £895M Diversity fund. He also observes the inverse correlation of gold performance this year linked to the decline in the US dollar value.

Gold bars

Following a similar theme Architas investment manager, Nicholas Sweeny calls gold a “prudent” diversifier and has increased their position this year so far. Whilst more cautious Ben Seager-Scott, Tinley’s Director of Investment Strategy, states that he is “incredibly wary” of gold but that the asset is included in the firm’s portfolios.

Seager-Scott is quoted “I’m not holding it specifically against inflation risks, rather it’s for diversification versus bonds and equities, which look expensive after years of excess liquidity from central banks,” he said.“Even though history has shown it shouldn’t be thought of as a ‘safe haven’, it could nevertheless be an attractive store of wealth if there is a market correction.”

Robin Kyle, an investment manager at Tcam, said that he could understand the current demand case; “There is potential for safe-haven assets to do well, especially if you’re worried about bonds and bond proxies.”

Lafite Rothschild

Fine wine, another “safe haven, tangible asset, is less volatile than gold and Liv-ex performance data at the end of March 2017 compares FTSE 100, S&P 500 and gold. We can see the strong performance of gold year to date and the drop off in March, and fine wine’s stronger one-year performance and the five year view reflecting the well-publicised market trend in fine wine with gold’s comparatively weaker performance.

INDEX LEVEL
31.03.17
M.O.M (%) YTD (%) 1 year (%) 5 year (%)
Liv-ex 50 343 1.2 2.3 22.4 -0.4
Liv-ex 100 304 0.7 2.3 21.7 3.7
Liv-ex 500 299 1.2 2.1 20.2 13.6
Liv-ex 1000 307 1.2 2.3 20.9 19.5
Liv-ex Investables 331 1.0 2.3 21.5 8.6
FTSE 100 7,323 0.8 2.5 18.6 27.0
S&P 500 2,363 0.0 5.5 14.7 67.8
Gold 995 -1.3 6.9 16.0 -4.7

Source: Liv-ex.com

Gold is generally thought to be a solid, portfolio component to manage risk, the data consistently shows that an element of this strategy should also be deployed in fine wine.

For more information download our latest fine wine market report at https://www.vin-x.com/monthly-market-review or speak to a member of the Vin-X team 0203 384 2262.