Gold is a 'good hiding place' for investors as S&P 500 falls nearly 16% this year - Franklin Templeton

NEW YORK (May 11)  The gold market has fallen through initial support at $1,850 an ounce; however, one portfolio manager said that the precious metal remains an attractive safe-haven asset as market volatility grows.

In a  telephone interview with Kitco News, Steve Land, vice president and portfolio manager of Franklin Templeton's Franklin Gold and Precious Metals Fund, said that although gold has struggled to attract any consistent bullish momentum, it continues to outperform equity markets.

Since the start of the year, the S&P 500 has fallen 16% as the index drops to 4,000 points Tuesday. Meanwhile, even with Tuesday's selling pressure, gold prices are roughly neutral for the year. June gold futures last traded at $1,836.70 an ounce, down more than 1% on the day.

"The big headwind had been the strong U.S. dollar. When you consider that, I think gold has actually been performing reasonably well," he said. "Gold's role in times of crisis and uncertainty is to maintain and preserve value, which it is doing."

Land said that although gold's performance has been disappointing in recent weeks, he sees the price action as a consolidation phase following a strong first-quarter performance. He added that investors will continue to see gold as a vital diversification tool and inflation hedge.

"There's no question that there are a lot more moving pieces in the global economy than there have been in a long time. Gold's, low correlation to markets, means it's someplace investors can hideout to a degree," he said.

Although the U.S. dollar remains near its highest level in 20-years, driven by rising bond yields and interest rates, Land said that investors need to keep paying attention to the broader financial landscape.

KITCO