Rachel Benepe, who manages First Eagle Gold Fund, which carries Morningstar’s top rating, says gold remains a solid investment choice.
The precious metal hit a record high above $1,200 before dropping about 10 percent in recent days.
“We continue to view gold as our insurance policy,” Benepe told CNBC.
“We view gold as the ultimate insurance against any event you think you need downside protection against. If it’s inflation, deflation, fill in the blank.”
The biggest risk facing the market now is the massive fiscal and monetary stimulus packages adopted around the globe and the uncertainty about how governments will exit them.
“In case something does go wrong, and there are unintended consequences, we feel gold will act as insurance for those events,” Benepe said.
Central bank purchases have been a major pillar of support for gold this year. For example, India’s central bank recently bought 200 metric tons of gold from the International Monetary Fund for $6.7 billion.
That trend should continue, says Benepe, whose fund has returned 36.6 percent this year.
“Central banks, as they worry about currencies, as they worry about how other central banks handle their currencies, they start to diversify, and gold becomes a substitute currency.”
Other experts agree with Benepe. “Central banks recognize the economic crisis could linger,” William O’Neill, a partner at Logic Advisors, told Bloomberg. “Gold has assumed the front and center position as the alternative currency.”
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