Despite the recent dramatic gold sell-off, many are still arguing that the investment charms of the yellow metal remain, and there may even be a buying opportunity in the form of small and mid-cap producers.

Many of these companies have fallen victim to an indiscriminate exodus from gold producers due to perhaps unfounded concerns that they cannot prosper in the current environment, according to Angelos Damaskos, chief executive of Sector Investment Managers and fund advisor on the Junior Gold vehicle.

While Damaskos concedes that “many undercapitalised explorers and promoters of marginal assets may disappear in the current malaise”, he believes that his fund’s investments remain strong and poised to benefit from a recovery in gold prices. (Gold has plummeted from its historic peak of $1,900 per ounce in September 2011 through to around $,1406, as at 14.00 GMT Friday.)

Damaskos is confident on the continued performance of most of his fund’s holdings, since these are well-capitalised, producing companies with operating cost structures well below the current gold price. What is more, they can continue operations for prolonged periods of lower prices due to their low debt and fully-funded activities, he said.

Smaller mining shares may have been somewhat of a turnoff for investors, but Damaskos remains convinced that many have strong recovery potential. Indeed, many are of the view that gold’s fortune’s will improve in the second half of the year.

While junior gold may present opportunities, it seems that mid and large cap producers may still be where investors are most comfortable. As featured by WealthBriefing at the end of last week, Lombard Odier estimates the average cost of producing an ounce of gold will be about $1,050 per ounce during 2013 for senior and intermediate (large and mid-cap) producers – a figure which puts the precious metal’s recent fortunes into context.