Gold prices hit record highs last week as sovereign debt fears sent investors scurrying into ‘safe havens’. If you fancy a high-octane play on gold, you might consider the fledgling gold fund Junior Mining. Created in September 2009, the £25m fund is managed from London by Angelos Damaskos, a specialist investor in small-cap oil and mining firms.
Damaskos favours investing in small gold processing or extraction companies, rather than in gold itself. He notes it is “much easier” for small miners to grow their share price than larger rivals, as a single discovery has a big impact. Smaller miners have more concentrated assets, making it easier for “selective investment” in a geographic area or commodity.
He thinks smaller firms, such as core holding Spanish Mountain Gold, are less researched, so the market is slow to “recognise the real value of their projects”. An added bonus is that they may be taken over.
A full 70% of his portfolio is in gold stocks with the rest shared equally between other precious metals, base metals and uranium. So far the strategy has paid off – Junior Mining gained 31% since September 2009, compared to the yellow metal’s 24% rise in the same period. Damaskos expects further increases as last week’s hike in the price of gold has not yet been reflected in the price of his holdings. He predicts “upward adjustment” in the weeks to come.
Long term, Damaskos is “optimistic about the gold price” because he is “pessimistic about the world’s major economies”. He believes that eventually countries such as the US and Britain will try to inflate their way out of debt. That will weaken fiat currencies and further boost real assets.
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