Ventre, manager of Skandia’s spectrum and multi-asset range, thinks that the recent surge in demand for the precious metal has actually worked against it.
"Bullion has now fallen below $1,600 an ounce, coinciding with a general sell-off in risk assets," he said. "So far this year, the metal strengthened for the first two months alongside risk assets and has weakened for the last two months of the year, also alongside risk assets."
"With this higher and unwanted correlation, investors may begin to question whether the metal can provide the portfolio hedge that they [required]."
Performance of gold vs indices in 2012
Source: FE Analytics
Gold has been one of the best-performing asset classes of recent years, delivering more than 327 per cent over the last decade, 179 per cent over five years and 59 per cent over three.
Performance was particularly strong during the 2008 financial crisis. According to our data, the S&P GSCI Gold Spot index returned 43.86 per cent over the calendar year, compared with losses of 30 per cent from the All Share and 13.4 per cent from the S&P 500.
Performance of gold vs indices over 5-yrs
Source: FE Analytics
However, if gold’s high correlation with equity markets endures, its popularity as a safe haven asset is likely to wane significantly.
"I think this is an example of our old friend 'the crowded trade' rearing its head," continued Ventre. "Many investors now own the asset, even though the market is in fact incredibly small – all the gold in the world can be moulded into a 68 square-foot cube."
As a result, Ventre has removed any existing exposure to bullion across his portfolios, joining the likes of FE Alpha Manager Martin Gray, who has cashed in on the profits he made from the precious metal in recent years.