Gold miners offer significant value to investors given the dislocation between their share prices and that of the metal they produce, according to Tim Gardner, co-manager of Legal & General’s multi-manager fund range.

"Dislocation is now back to the relative lows last seen in 2008," he said.

"On conventional metrics such as price-to-earnings, price-to-net asset value and price-to-cash flow, miners continue to offer value relative to history and the broader market."

According to data from FE Analytics the gold spot price has risen 16.95 per cent in the past year. In contrast the best-performing gold fund – Blackrock Gold & General – has lost 16.7 per cent, while the average gold-focused portfolio is down 29.1 per cent over the period.

Performance of funds vs index over 1-yr



Source: FE Analytics

As a result of this relative underperformance, Gardner says gold equities offer far better value than bullion, and could be set for a surge.

"The potential for M&A within the gold mining sector remains attractive, supported by the fact that gold is currently in contango (that is to say future prices are higher than the current spot price) and that the gold price is currently higher than the combined cost of buying a typical company and that needed to extract future gold from the ground," he continued.

"Add to the above our still positive stance on gold (particularly given the prospect of a lengthy period of negative/low real interest rates), then overall we believe patient investors should ultimately be rewarded by holding an allocation to gold miners."

Martin Arnold, senior analyst at ETF Securities, also remains positive on the outlook for gold. He believes that recent comments made by Federal Reserve vice-chairman Janet Yellen should support its price in the coming months.

Yellen said the US central bank was "willing and committed to take whatever actions are necessary" to promote employment and stable prices. This was taken by many as a direct reference to quantitative easing, which traditionally has a positive effect on bullion.

The US dollar weakened following the speech, leading to gains for all precious metals and gold bouncing back from its lowest level in three months.

All three of Legal & General’s multi-manager portfolios have a significant weighting to the Investec Global Gold fund, as well as individual positions in gold mining stocks such as Newcrest Mining and Goldcorp.