Anthony Bolton : Commodity investors too late. Gold the only exception

Commodities enthusiasts are investing five years too late, according to legendary fund manager Anthony Bolton.

"The best time for commodities was in 2006, when the whole world was growing above trend," said Mr Bolton, who manages the Fidelity China Special Situations investment trust.

"Western economies are anaemic at the moment, and I am not sure emerging market growth is enough to keep commodities going."

Despite many managers believing that commodities are a key part of the emerging markets story, Mr Bolton holds only one commodities stock in his fund, a gold mine.

It is uncertainty about America that is keeping Mr Bolton from increasing his exposure to commodities. While China is experiencing a bull market, he warned that the "stars of one bull market are not necessarily the stars of another".

He continued: "Commodities are measured in US dollars and the US dollar has been weak for the past couple of years. If commodities were measured in a stronger currency, the recent rallies might have been different."

The exception to this rule, according to Mr Bolton, is gold. He said he considered it a good investment while the West was experiencing slow growth.

"Gold is more like a currency than a commodity," he said. "Only a small fraction of gold mined is used – for jewellery and the like. The way it is held as an asset in central banks is not a feature common to other commodities.

"Almost every country has a big budget deficit at the moment so it is in their favour to see their currency depreciate. Countries hold gold as a protection against that."

Chinese investors have also started to take an interest in gold, he said, where previously they were buying American bonds.

Mr Bolton, who formerly ran Fidelity's hugely successful Special Situations fund, which is predominately invested in the UK, also warned British investors that they might be in for a few more disappointing years yet.

He quoted Jeremy Grantham, the American fund manager, who likened economies in the West to the biblical story of Pharaoh's dream of seven fat years followed by seven lean ones.

"I don't think it will be as long as seven years of slow growth, but I'd say the UK was two years into a five-year cycle." He believes that Europe and the US face similar challenges but that we will all just have to "sit tight" through the recovery.

Mr Bolton was much more confident about China's growth, now that the country has begun to distance itself from dependency on the US.

"The global financial crisis was a wake-up call for China. It has driven them to be less reliant on the US economy. It won't happen overnight, but there will be a big change over the next five to 10 years," he said.

Last week Mr Bolton issued £162m worth of extra shares in his trust to meet demand from investors and to reduce the trust's premium (where the value of shares is higher than the net asset value of the trust).

If all the shares are bought it will take total funds under management to more than £732m.

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