Sales of gold have fallen 5% this year, and demand to hold it as a hedge against risk has lessened since December. ETF gold holdings have fallen by 140 tonnes in so far in 2013, but still stand at a substantial total of 2,491 tonnes.
In its Wealth Watch report, Coutts stated it was looking to reduce its exposure to gold and would be giving precedence to assets geared towards economic growth.
However while investors have been actively selling their gold stock, central bank purchases of the precious metal have increased. The South Korean central bank bought 20 tonnes of the yellow metal in February, its first gold purchase of the year after buying 30 tonnes in 2012.
Still holds value
Despite its decision to reduce gold exposure, Coutts states it still views it as a valuable portfolio asset given the backdrop of currency devaluation and near zero interest rates. It also sees it to be more attractive than other traditional value stores such as government bonds.
Gary Dugan, CIO Asia & Middle East for Coutts, said: “Many commentators suggest central-bank buying could potentially push gold back to its highs (over $1,900 in 2011), although we tend to disagree.
First, central banks like all investors want to be smart in their buying and are unlikely to chase the price higher, particularly given the selling pressure from retail investors. Second, the argument for central bank buying is the diversification of reserves as other currencies become debased by quantitative easing (QE or central-bank asset purchases).
“The debasement of currencies is certainly the case for the yen and to some extent sterling currently, but less so for the dollar,” he concluded.
