Gold’s bull run is not over as inflationary impact of $200 oil could be “very supportive”

The fund managers of Golden Prospect Precious Metals (GPM), last year’s best-performing investment company, are confident gold will restore its shine after slumping 11% last month as they believe much higher oil prices and inflation

Mining investors Keith Watson and Robert Crayfourd, who are working out their notice at Manulife CQS before joining alternative assets manager Tufton, say that will be positive for their portfolio of mining stocks which they believe are still undervalued despite posting a 170.5% total return last year, a result that chair Toby Birch said was “outstanding” against the 52.8% surge in the price of gold.

Although gold subsequently slid from record highs, dropping $578 an ounce to $4,700 from $5,278 in the turmoil caused by US-led attacks on Iran and the closure of the Strait of Hormuz, Watson and Crayfourd believed the precious metal had maintained its role as an insurance asset.

They said gold was often initially sold during times of market stress due to its high liquidity with holders this time incentivised to take profits given the big gains they made in 2025. In the 2008 global financial crisis and the 2020 Covid crash, gold had similarly fallen 15%-20% before performing strongly in the following 12 months, the managers pointed out.

The duo expect a similar outcome in the next year, believing the duration of the closure of the strait –through which a fifth of the world’s oil is shipped – is “hugely significant” for crude prices, and by implication the global economy and precious metals.

Brent crude currently trades at $102 a barrel, up from $73 at the end of February, but could go much higher, they warned.

“Many sector specialists and commentators, we included, believe a loss of this magnitude justifies a much higher oil price, with an excess of $200 per barrel possible. This could prove hugely inflationary for the global economy whilst weighing on growth, a term known was stagflation.

“Historically, this has been a very supportive environment for the gold price. Even with the recently announced ceasefire, it could take months to ramp back up closed Middle Eastern oil fields, whilst the world has already lost over 300m barrels of oil supply that would ultimately need to be restocked tightening future markets.”

Interest rate rises in response to the inflation caused by higher oil prices would further burden debt-laden Western governments which “should leave gold remaining an important reserve asset”. This was against what they called the “deteriorating quality” of US government bonds. Previously viewed as the largest “risk-free” asset class in the world, US treasuries had recently been supplanted by gold as the main holding of central bank reserves.

In separate commentary on the £013m trust’s February fact sheet they highlighted that US annual debt-servicing costs were running at over $1trn, the largest item of federal spending even before President Trump’s proposed increase in the defense budget.

“We expect central banks to remain meaningful buyers of gold given the macro backdrop, although some may become forced sellers to fund energy subsidies or military spend,” they said in GPM’s annual report.

It’s not just the managers on the move, which has prompted the board to serve protective notice against Manulife as it considers whether to follow them to their new employer. Birch will also step down at this year’s annual general meeting to be replaced by Monica Tepes, the former investment company analyst who joined the board two years ago.

Birch hoped the share price, which is currently flat year to date at just over 95p, would recover to stand well above the 1 December net asset value (NAV) of 104.6p by November, as that will be the price at which shareholders can buy in the annual one-for-five subscription offer. Last November, GPM issued 14.6m shares at 48p to raise £7.5m for the managers to invest. At the time the shares stood at 88p. Today they stand on a 22% discount to their diluted NAV per share of 122.4p at 9 April.

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