There is a certain irony in gold's resurgence as printing presses crank up to produce more cash, given the precious metal's former role in underpinning the value of money.
As an investment class gold is polarising. A lot of investors won't have a bar of it, citing lack of returns and its counter-cyclical weighting to a normal bull run.
American investor Warren Buffett has been vocal in his disdain, saying, "It doesn't do anything but sit there and look at you." He has no problem with silver, however, given its use across industrial and medical applications.
But in a world of quantitative easing and negative interest rates, fund and investment managers are taking a hard look at things that just sit there and look at you. They can scarcely ignore it, considering a run of form that saw spot gold hit US$1851 ($3034) an ounce last week, levels last seen in 2011-12.
"We like gold, it's a good, sensible choice to have in a portfolio," said Mark Lister, head of private wealth at Craigs Investment Partners.
Lister likes it because it has a low correlation to property, cash and fixed income. "This can be helpful as a hedge to uncertainty, as it performs well when times get tough and while the value of your currency is being eroded."
He equates a gold holding to an insurance policy but gets nervous with holdings of more than about 5 per cent of the overall portfolio. "Within the bigger picture, you almost hope it doesn't do well as it means things aren't going well with the rest of your asset classes."
Gold has performed, however, outclassing the ASX's all ordinaries gold index, up 23 per cent for the year to date – this in the context of a lacklustre ASX 200 down 17 per cent over the same period.
In Europe, the UK's Ruffer Gold Fund returned almost 30 per cent for the first four months of the year, riding the back of Covid-19 fears. Other precious metal products from asset manager BlackRock also came in the top of Morningstar's ratings.
The gold price has been the principal driver of that, as investors sought a "safe haven", recognising its store of value and history of outperformance in times of economic uncertainty.
A report last week by investment house Jarden points to gold's inverse relationship with US Treasury inflation securities as a key driver of price. With Credit Suisse analyst Andrew Garthwaite suggesting that the US bonds could fall to minus 150 basis points, Jarden has inferred a gold price of more than US$2000 an ounce by the end of the year.
Based on those pricing parameters, Jarden suggests ASX-listed mining stocks St Barbara Mining and Northern Star Resources represent good value, as they remain the cheapest relative to their implied gold prices. St Barbara's discount is about 37 per cent at an implied spot gold price of US$1,386 while Northern Star's is at 24 per cent on its spot price of US$1505.
By contrast, the most expensive counter on the mining index is large-cap Newcrest Mining, trading at an implied gold price of US$1,776 an ounce; and a 3 per cent premium on its valuation.
Jarden's ratings show that OceanaGold, which has a more local flavour through its Macraes and Waihi gold mines, is trading at a 10 per cent discount to its implied spot price of US$1659.
Outside of trying to pick a stock winner, investors keen on gold have the option of buying bullion direct or investing in an exchange traded fund such as GLD, a US$42 billion Wall Street fund offering investors an easy and cost-effective way to get indirect exposure to gold, while removing volatility. GLD shares are priced at about one-tenth of the cost of an ounce of gold, backed by actual bullion sitting in a vault.
Gold, however, has not been first choice with New Zealand fund managers. Frank Jasper, chief investment officer with Fisher Funds, said precious metals were largely non-starters across any of its nine investment strategies and its $10b of KiwiSaver products.
Jasper said the dynamic that the Covid-19 health crisis has brought is a near-zero interest rate, challenging returns from fixed income.
"Fixed income has zigged when equities have zagged, so you always had a mechanism built in for diversification. But the loss of correlation between fixed interest and equities brings an asset class like gold into the frame."
He said fund managers might be choking on the idea now but gold will be a "serious consideration" over the next decade across multi-asset portfolios.