Invest in gold and silver to insure against central bank action

ii Fiight Club: On 23rd January 2020, interactive investor and Merian Global Investors hosted a joint event at Shakespeare’s Globe, where Merian’s head of UK equities, Richard Buxton, and monetary metals expert, Ned Naylor-Leyland, debated the outlook for the year ahead. Here, Ned provides a recap on some of his latest thinking. 

Ned Naylor-Leyland, manager, Merian Gold & Silver Fund

When many of the world’s major central banks hold gold in huge quantities as their “zero-risk” investment of choice (and, indeed, have been increasing their exposures), is it sensible for investors to ignore what has historically been a core asset class, or should an allocation to a monetary metals product that adds diversification be under serious consideration?

We believe that gold and silver exposure is something from which many investment portfolios would benefit, given its potential to enhance portfolio diversification and to help preserve purchasing power over the long term. 

We also feel that focusing on achieving best-in-class exposure to both physical metals and mining equities will prove crucial in the future. With these points in mind, we believe it is prudent and appropriate to avoid less developed and lesser-regulated mining jurisdictions, such as some of those based in Africa and Central Asia, and instead to concentrate investments in the Americas and Australia.  

Equally, we believe that exposure to the metals themselves is best achieved through superior quality listed ‘bullion funds,’ rather than the more widely-known physical gold and silver ETFs. In managing our portfolio, we seek to take advantage of the amplified return potential of silver versus gold (in a bull market for precious metals, the silver price typically rises faster than gold, whereas in a bear market it typically falls faster) as a central driver of overall returns. 

With the ‘white’ metal (silver) at historically cheap levels relative to its ‘yellow’ brother (gold), and global central banks expanding their balance sheets once more, we believe that investors in monetary metals have cause for optimism as they look to the year ahead. 

About Ned Naylor-Leyland:

Ned joined the company in 2015 and manages the Merian Gold & Silver Fund. He has nearly two decades of experience in precious metals investing, having founded a dedicated monetary metals fund in 2009 at Quilter Cheviot. Ned began his career at Smith & Williamson and graduated from the University of Bristol in 1998 with a BA (Hons) in Spanish.

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