Gold will continue to serve as a hedge against risk on a longer-term basis despite recent falls, given the lack of other safe-haven assets to protect investors against global economic uncertainty, a manager at Stenham Asset Management said.

Gold has come under pressure in recent days amid a steep sell-off in commodity markets and is set for its largest monthly slide in three years as of Monday. At its lowest, it was almost 20 percent off this month's record highs above $1,920 an ounce.

Jaspal Phull, portfolio manager for the Stenham Global Resources fund of hedge funds, said that gold still has benefited at a time of growing unease globally from a move by the Swiss National Bank to curb the Swiss franc's rise, which effectively dimmed the currency's status as a safe haven.

The scenario for precious metals is bullish over the long term given the uncertainty out there. As other safe havens such as the Swiss franc are cut off, investors will potentially turn to gold. It is behaving more like a currency than a commodity, and it can't be manipulated, he said.

If you look at the concerns out there, I don't think we're in a bubble. Investors' interest in gold is high, but it is still insignificant compared to other assets.

Gold hit a record high of $1,920.30 an ounce in early September and is still up more than 13 percent for the year to date.

The gold price has moved higher very quickly. Therefore in the shorter term, you may see profit-taking as investors look to cash in on their more liquid investments, Phull said, adding that the fund purchased a gold put option in early August to protect against falls in the precious metal.

He said the souring economic environment had also prompted fund managers to go short on growth-sensitive assets such as copper and energy.

Growth in the Western world is consistently being revised lower. Whilst China is still doing well, growth there is expected to come off a bit as well.

China is such a big part of demand when it comes to things like copper, so any slowdown will have a big effect on demand for base metals. Fundamentals in the short term don't look fantastic, Phull said.

Recession fears have prompted a sell-off in commodities in recent days, with three-month copper on the London Stock Exchange dropping to its lowest in 14 months on Monday and Brent crude falling to seven-week lows.

BULLISH ON AGRICULTURE

The Stenham Global Resources fund has divided its investments between 12 asset managers, with roughly a 70-30 split between commodities futures managers and equity long/short managers.

Phull said the managers were bullish on agriculture on the view that demand is set to outstrip shrinking supplies.

During this year we have started to see that USDA estimates for crop yields were too high, and we look to be heading for historical lows in terms of stocks-to-usage ratios, particularly in corn, he said.

Whilst the managers are bullish about fundamentals in agriculture, given the concerns about global growth, they remain cautious on positioning.

The fund also has exposure to water assets through its equity long/short managers, who invest in utility stocks.

Despite current volatility in equity markets, Phull expects scarcity in global water supplies to play a part in lifting the value of water stocks over a longer-term horizon.

They might go down with the market, but they are defensive stocks. Over time, water equities have shown a low correlation with other equities.

The Stenham Global Resources fund, which has $48.9 million in assets under management, fell 0.72 percent in the month to August, outperforming a 7.26 percent drop in the MSCI World equities index, and is up 9.24 percent compared with a year ago.

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