The SF T1ps smaller companies fund, which is owned by UK-based Rivington Street Holdings and invests in precious metal equities, says the key to its strategy is to buy companies which look attractive on a metric of $900 gold, but is expecting the metal price to head towards $1500 per ounce in 2010.

Gold is provoking strong opinions amongst the investment community at the moment: it has crossed the $1000 barrier, which has only happened once before, and gained close to 50 per cent in a year.

Gold was partly boosted by the dollar’s collapse this year, the currency in which it is valued, but not all the gains can be put down to this.

The sheer panic invoked by the prospect of economic collapse in 2008, which still looms in investor’s minds, caused a rush into tangible assets. Also, fears about medium term inflation, and the prospect of emerging economies such as China increasing their proportion of gold reserves – potentially providing a huge boost to demand – support the price. 

“The gold price has come back from its recent highs. However, the reasons for buying gold stocks - a leveraged hedge against inflation - still remain intact and their valuations are now even more appealing. We view their recent weakness as an opportunity to buy,” said Tom Winnifrith, co-manager of the SF T1ps smaller companies gold fund.

Even though SF T1ps is bullish on gold, its strategy is to only buy companies that would be profitable at $900 per ounce, leaving room for considerable upside if their price predictions are realised. Recent portfolio acquisitions include Minera, Chaarat Gold and Avocet.

However, other wealth managers are more bearish. Danish firm Saxo Bank recently predicted gold would fall to $870 in 2010, and Peter Hicks, head of UK retail sales at Fidelity International, said in an article for WealthBriefing this month that, “with no income to rely on, the success of an investment in gold all boils down to one simple strategy: buy low - sell high. At the end of a year when gold has broken one record after another, only a very brave investor would consider jumping on this bandwagon now”.