Question-marks over the longevity of the Fed’s asset-purchasing programme and the buying power of the likes of China and Cyprus have contributed to the precious metal's crash.
The S&P GSCI Gold Spot is down more than 12 per cent over the last week or so, sending the price of the precious metal down to $1,395 – well off its all-time high of $1,920 in September 2011.
Performance of gold over 1yr
Source: FE Analytics
However Foster, who runs the Lombard Odier World Gold Expertise fund, says that while the sell-off was more drastic than he imagined, there are still numerous reasons why gold is worth holding.
"Once gold stabilises, probably around current levels, it could represent the buying opportunity of a lifetime," he said.
"The unprecedented sell-off was technically driven. Despite knowing the risk, this sell-off was bigger than we anticipated."
"While sentiment has been negative for gold, as markets assume the Fed is about to withdraw its liquidity measures, the sell-off through $1,525 was technically driven, in our opinion."
"The fundamentals for gold as a safe haven have not changed."
"We still believe that there are risks to the financial system that the market is currently ignoring, such as fiscal deficits that continue to raise debt levels, trillions in banking liquidity that could ignite an inflationary cycle, the massive US entitlement burden, a possible bond bubble, the weak banking system, and a recession in Europe and Japanese monetary policies creating imbalances globally."
Many industry commentators have said that the sell-off in gold heralds the end of an extended bull market in the precious metal's price.
According to FE Analytics, the precious metal has risen by 337.42 per cent over the last decade.
Performance of gold over 10yrs
Source: FE Analytics
However, it has lost 14.69 per cent over the past month.
Despite this, Foster says investors cannot allow themselves to be caught up in the hysteria and should avoid following the crowd of doubters.
"This kind of capitulation in the gold market has been seen before and it will take a little while for the dust to settle," he said.
"We believe that gold may consolidate for a while, with the potential for another down-draft before we see a positive trend develop into the fall."
"Further, high-cost gold companies could begin to cut capital and curtail operations at $1,400 per ounce, which could, fundamentally, also help establish a floor."
"Despite the magnitude of this sell-off, we believe it does not necessarily signal the end of a longer bullish market."
"We tend to look at this as a mid-cycle correction, analogous to the one from around 1975 to 1977: different drivers but the same sentiment towards gold."
"At that time, markets thought inflation was whipped, only to have it come back with a vengeance," he added.
As FE Trustnet recently highlighted, the FE Alpha Manager trio of John Chatfeild-Roberts, Peter Lawery and Algy Smith-Maxwell said they would maintain their gold exposure across the Jupiter Merlin range.
"To have a currency that cannot be printed is a sensible holding in a portfolio," Smith-Maxwell said.
Mike Turner, head of global strategy and asset allocation at Aberdeen, says that the importance of diversification means investors cannot afford to give up on the precious metal.
"No one really knows the long-term consequences of the huge monetary stimulus packages implemented to rescue the global economy from the clutches of deflation-depression," Turner said.
"Inflation remains a risk, however distant, and gold remains one of the best insurance policies against this threat."
"Equally, if deflation prevails, this brings into question the soundness of fiat money, in particular currencies such as the euro, which seems much less stable at the moment, and gold represents the best store of value against that prospect."
"Undoubtedly, though, the recent massive price decline will have shaken the nerves of the most ardent gold bugs and it may take some time for investor sentiment towards the yellow metal to recover."
"We continue to believe that gold can play an important role within a diversified portfolio and we are likely to allocate again to the asset class."
Adrian Lowcock, senior investment manager at Hargreaves Lansdown, also believes that retail investors would be making a mistake by ignoring gold.
"The price of an asset can move for a number of reasons, and the recent volatility appears to be driven by programmed trades which are set to sell when a certain price is reached," he said.
"This triggered further selling, causing the markets to overshoot. However, physical gold investors took this moment of weakness to buy, with business coming out of India."
"Longer-term, the outlook for gold remains intact. New supply of gold remains low."
"The loose monetary policy of Japan, the UK and the US and huge amounts of QE are storing up problems for the future and are likely to weaken currencies and drive up inflation."
"Gold is attractive as a hedge against inflation over the longer term," he added.