'Smart money' buying gold again?

Updated: 
Got any gold? The precious metal has boomed under financial apocalypse fears, yet to be realised. But this asset class has plummeted -30% in the last two years since its $1,900 an ounce high.

However a new survey from Bullion Vault claims gold investors are using recent price drop to bolster their holdings further. A good idea?

Spell wearing off?

Frankly, who knows. Anyone who bought gold through an ETF in the last couple of years will have been roughed up. Some of this speculative cash will have sold as the price has plummeted. Gold rises and falls, bluntly speaking, on the level of financial hysteria popping in the air.

Bullion Gold claims that 37% of investors they questioned haven't switched their silver and gold holdings, but 43% had actually upped their holdings to take advantage of the falling price. The World Gold Council, unsurprisingly, is talking up the asset class.

"We feel that gold is nearer the bottom than the top right now," it told CNBC. "You'll see a stronger market towards the end of the year, and into next year."

Recently investor Jim Rogers claimed that gold is likely to fall to $900 an ounce. Currently it's at $1,294 an ounce, though this price dipped to below $1,200 in late June. Interestingly, Rogers confirmed he has not sold any of his gold holdings.

Little income defence

For now, the broader economic anxiety appears to have subsided. (Silver has taken an even sharper hit, down by more than 35% in the last six months.) Be aware that gold generates no dividends, so there's little protection against inflation. In that sense, it's dead money.

But were the likes of China to say to much of the Western world that future payments in dollar paper were no longer acceptable, then gold would clearly soar. Recent US economic data has been more encouraging though, with US Fed chairman Ben Bernanke hinting at scaling back the cheap money, or QE.

Most financial advisers will tell you gold should be part of a balance investment portfolio, like an insurance policy. So if the price drops sharply, it should mean the bulk of your investment in other asset classes will rise.

SPONSORED FINANCIAL CONTENT