×

Quantitative easing is killing trust in capital and boosting gold, says investor

Desperate central bankers are undermining trust in capital and boosting gold with their polices, an asset manager has warned.

Swiss Asia Capital managing director and chief investment officer Juerg Kiener said quantitative easing was "killing capital" because it cost investors to hold cash but did not also reduce the size of their debt.

"When you have capital getting reduced and you have still have your debt outstanding, what you get is credit risk…Gold is basically another insurance against financial dislocation in an environment where your credit is actually the issue, not liquidity," Kiener told CNBC's "Capital Connection".

The Bank of Japan stunned markets on January 29 by adopting negative interest for the first time, following in the footsteps of several European central banks.

And while central banks could "print as much money as they want" in the hope of stimulating growth, that would not reduce the risks to solvency brought about by credit risk, Kiener added.

Kiener said that with gold gaining $200 an ounce, or more than 10 percent, in just a month, he expected some correction and profit-taking soon.

"The fundamentals haven't really changed, we've got really weak global economies, we've got desperate central bankers who are trying to stimulate economies,' said Kiener, alluding to the broader markets.

The spot gold price was down 1.9 percent at around $1,206 an ounce in afternoon Asian trade on Thursday, paring earlier gains from investors who piled in to the precious metal on the back of dovish minutes from the Federal Reserve's most recent policy meeting, released on Wednesday.

Notes from the January Fed meeting revealed that monetary policy committee members worried that tighter global financial conditions could hit the U.S. economy. The Fed considered changing its planned path of interest rate hikes in 2016, according to Reuters - a path that has seen its policy diverge from that of other major central banks.

Gold prices fell around 10 percent in the second half of 2015 on fears that interest rate hikes from the Fed would dent the appeal of the non-interest bearing asset. But with negative interest rates back in the picture, the yellow metal has regained favor because it would cost investors more to hold cash.

Follow CNBC International on Twitter and Facebook.