Gold has had its moments recently, but there's not more to it, Stephen Jones, chief investment officer at Kames Capital told finews.asia in an interview. He doesn't expect a Brexit to make much of a difference.

Mr. Jones, gold has appreciated by 20 percent since the start of the year. Is this the start of the great comeback of the precious metal?

I don't think so. Gold admittedly has had its sunny spells in the past months. But the most recent development is but a brief boom in a bear market.

What makes you think so?

Investors may have become a bit more cautious, which has become manifest on the exchange. But with a most moderate outlook for inflation, it is not worth buying gold. Shares remain the better option, even if the risks have increased. Gold doesn't generate a yield and has high opportunity costs.

«The conditions for a cautiously positive development of the markets remain good.»

But gold definitely is in greater demand than it used to be?

The price might go up to as much as $1,300 for an ounce. But I don't expect anything above that. The conditions for a cautiously positive development of the markets remain good, given the economic development in the U.S. as well as the situation in Europe, with the monetary policy measures taken by the European Central Bank (ECB).

What makes you so certain that the most recent program by the ECB will yield a positive result?

It was rather remarkable that the announcement of the ECB measured a mere 400 words and had its effect without any delay. The spreads narrowed immediately by 20 basis points – three months before the measures will take effect!

The markets are taking their lead from the expectations. This could lead to disappointments?

You can't exclude anything. But the economic goal of the ECB is to reach a growth rate of 2 to 3 percent in Europe and to create new jobs. That's what the ECB will be measured by and that's how it has to perform.

«People tend to forget that a potential exit of the U.K. won't happen overnight.»

Provisions of this kind always take time to take proper effect. The experience from the U.S. shows as much. The ECB has to create the conditions taking into account that other, partly political, events can affect the development. For instance the problem with the refugees in large parts of Europe, but mainly the upcoming vote on the Brexit.

What do you think will the outcome of this vote likely be?

My opinion isn't that important. The question is how the markets will react. In my opinion people tend to forget that a potential exit of the U.K. won't happen overnight but in an organized fashion over the period of several years.

During that time, markets can adjust to the new situation. The pound will see some strong turbulence around June 23, but the situation is likely to calm down quickly once the uncertainty has been removed.

What effects do you expect from a Brexit on Kames Capital?

Probably none as our financial products all are registered in Dublin and sold across Europe from there.

Asian markets have come under pressure recently, unlike gold. Is now a good time to go back in or is it still too early?

After the decline of the markets at the start of the year, the prices are very attractive both in emerging markets and therefore in many Asian countries. The Chinese government is working hard to calm the situation and to stabilize the markets. With their first reactions, they made the markets even more jittery; but now there's a more stringent policy being adapted.

«The Chinese stock market and the renminbi remain volatile.»

But the Chinese stock market and the renminbi remain volatile. The Bank of China is adding liquidity to the market, is cutting rates and supporting banks.

However, we have to expect a slowdown of growth. But when an economic power of the size of China grows a little less, it is far from being so bad as many experts say it is. It is important to implement structural reforms in the medium term to turn the country into an economy geared towards the domestic market.


Stephen Jones is chief investment officer (CIO) and member of the executive board at Kames Capital, an Edinburg-based financing company. The lawyer has been working in the financial market for a quarter of a century.