Ned Naylor-Leyland, Jupiter Asset Management
Just like central banks, everybody should own some gold as “sound money”, rather than just government issued currency, Ned Naylor-Leyland, head of strategy of gold & silver at Jupiter Asset Management, told FSA.
Physical gold is a risk-free form of capital, he said, adding that if people own physical gold, they are disinvesting. Physical gold means a proportion of their wealth is not participating in the market, they are completely safe and in the corner.
However, he acknowledged that this year hasn’t been fantastic for the gold price.
“But ultimately, what we’re looking at is continued balance sheet expansion by the central banks and rising inflation. And soon you should see a strong rally in gold and silver prices because of that,” he said.
Naylor-Leyland said he believes now would be a great time for investors to add gold and silver positions, despite the markets’ focus during the past 12 months on the tightening interest rate narrative.
“Central bank [ comments have not been good for gold and silver. But if you feel that they will back off, become less hawkish and support printing more money), then it would be a great time to add to positions.”
Naylor-Leyland said he believes the inflation is not transitory. “It is here to stay, and it is accelerating, which will send bond prices lower and bolster gold and silver prices.”
The $1.13bn Jupiter Gold and Silver fund managed by Naylor-Leyland has posted a 61.4% three-year cumulative return in US dollars, as compared with 58.63% by its sector average, and 47.17% by the LBMA Gold Price and 20.67% by the FTSE Gold Mines index, (both of which are the fund’s benchmark), according to FE Fundinfo.
However, the fund posted an annulised 36.88% volatility over a three-year period as compared with 26.05% volatility for the sector, according to FE Fundinfo.
The fund invests predominantly in a portfolio of equity securities of companies engaged in activities related to gold and silver.
As at 31, August 2021, the Fund’s top five holdings were: Sprott Physical Gold Trust Units, De Grey Mining, Sprott Physical Gold and Silver, Sprott Physical Silver Trust Unitts and Wheaton Precious Metals.
Including silver in the portfolio offers the potential for higher returns than a pure gold allocation, according to Naylor-Leyland. Silver prices typically increase in value faster than gold when precious metal prices are rising. But because the silver market is smaller, silver prices also decline faster when both metals are falling, he explained.
Silver also has dual importance as an industrial component, as well being a monetary store of value. There is growing demand for silver for use in green technologies, such as photovoltaic cells for solar panels, and it is widely used in electronics, said Naylor-Leyland. Silver can be found in solar cells, water purifiers, touch screen & smartphones, electric vehicles and semiconductors.
Asia’s third-party fund buyers joined the gold rush, but retained their risk appetite, according to Last Word Media research at the end of 2020.
Naylor-Leyland expects that the dollar will continue to weaken against gold and the all-time highs of gold and silver to be broken over the next year.
He suggested retail investors to have some physical gold in their hands. “That is the best way to start investing. It is the great entry point to understanding the idea of gold investment,” he said.
“When you hold physical gold in your hand, it’s quite an interesting experience. It changes your thinking about investment,” he said.
Jupiter Gold and Silver fund vs benchmark and sector average