LONDON (Reuters) - Gold is overvalued at its current near-record levels, with underlying supply and demand fundamentals justifying prices closer to $750-850 an ounce, said Nicholas Koutsoftas, a portfolio manager at GE Asset Management.
He said while the non-fundamental drivers of gold, such as demand for the precious metal as an alternative to the dollar or as an inflation hedge, could have a significant effect on prices, from a supply and demand perspective it is overvalued.
"When I look at gold in a fundamental sense there is nothing to make me say gold shouldn't be trading somewhere between $750 and $850 over the next 12 months," Koutsoftas told Reuters.
"Gold is one commodity which I have a hard time trying to derive a proper valuation for, based on its non-fundamental factors -- it is viewed as a hedge against a weak U.S. dollar, or rising inflation," he added.
"We use the marginal cost of supply as a measure to understand a commodity's fair value, and with gold, the marginal cost of supply is significantly lower than the $1,000 an ounce gold is currently trading above."
Koutsoftas manages a portfolio exclusively for General Electric Co's (GE.N) U.S. pension fund, total plan assets of which were $40 billion in June of this year. Less than 1 percent of the plan's holdings are invested in commodities.
BETTER SUPPORT
Koutsoftas said from a fundamental perspective, there were plenty of other commodities, including platinum and copper, which have better underlying support than gold.
