‘I invested in gold three years ago and lost 70pc – should I sell?’

Whichever route private investors chose to get exposure to the precious metal, the past three years have not been an easy rise for gold fans.

Both the bullion price and shares in gold mining companies have fallen significantly. Those who put their faith in a fund manager who specialises in both have racked up huge paper losses.

There are seven gold funds available to British investors, and on average they have lost 68pc over the past three years. An investor who ploughed £10,000 into one of these funds three years ago will today find that their investment has shrunk to just £3,200.

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Those who bought an exchange-traded fund that aims to track the performance of the gold price have faired slightly better, but have still posted a hefty loss. The precious metal was trading at around $1,547 an ounce in April 2011, but today has slumped to just over $1,300, a 17pc fall.

Gold is viewed as the Marmite of investment. On one side of the coin gold bugs argue that the precious metal offers the best insurance against the risk of inflation and other hazards that could potentially derail global stock markets.

But bears argue that it is impossible to value gold because it pays no income.

Last year investors slashed their gold positions, but since the turn of the year sentiment seems to have improved. Index fund provider ETF Securities said gold had been by far its most popular product over the past two months, with $858m flooding in.

Here, we ask two investment experts, who both invest in a range of assets and therefore do not have to buy gold, whether the metal's falls in recent years have created a buying opportunity or whether existing investors should cut their losses.

Gold bull

Mark Harris, who manages money for City Financial, the fund firm, started buying back into gold at the start of this year for the first time since 2011.

He said he viewed the sharp falls in the bullion price as a buying opportunity.

“When the price fell to $1,200 I thought the commodity had been sold off far too much and was too cheap to ignore at those levels," Mr Harris said. "Last year a lot of the speculative investors sold out of the metal completely, while the long-term believers stuck it out. I think the current price should provide an attractive entry point for investors because the price is likely to be less susceptible to sharp falls given that the large investors have exited.

“I think gold remains an effective hedge against market turmoil, such as the events that occurred earlier this year in Ukraine, and against inflation, so I think it makes sense to buy in at these cheap levels.”

Gold bear

Andrew Summers of Investec Wealth & Investment, the wealth manager, regards gold holdings as a "sell". He argued that, with inflation continuing to fall in Britain, gold did not have a purpose in investors’ portfolios.

The latest official figures show that inflation has fallen from 2.8pc a year ago to 1.6pc today. Mr Summers said he expected inflation to stay low for the foreseeable future, so he did not see any in reason to own gold.

“I think the threat of inflation is a long way away and may not be a problem until 2017 at the earliest, which is why I am a seller of gold rather than a buyer," he said.

“I also believe that gold has stopped behaving in the way that you would expect it to. For years the argument has been that the returns you get on bullion and gold mining shares are correlated, but in the past couple of years this has clearly not been the case.

“In buying an investment to act as an insurance policy you want it to behave in a predictable way. Given that this has not happened in recent years I do not view gold as a buy.”

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