Gyroscopic Investing

DAVOS, Switzerland—In the current uncertain environment, one hedge fund guru is in no doubt where investors should put their money – gold.

The fund manager, who wishes to remain anonymous, was unequivocal in his belief and was bullish on the longer-term outlook for the value of the precious metal: “Thousands of dollars per ounce,”? he says. “Thousands.”?

Read the rest here.

I am dubious on a number of levels, starting with a hedge fund manager who doesn't want to attach his name to such a bullish call on gold.  But who knows.  The world is drowning in paper money.  When it eventually starts moving there is the potential for a significant and global spike in inflation.  At which point we could indeed see a parabolic move in gold prices.

But I am not making any speculative bets on gold.  The world economy is still too weak and way too many potential crisis are waiting to derail any nascent recovery.  If someone put a gun to my head and made me bet on inflation or deflation, I'd say serious inflation is still a couple of years or more away. 

I'm not sure that the glut of paper money does have to "start moving" and I don't suppose there needs to be high inflation to cause the gold price to go up. It seems plausible to me that persistant negative real interest rates are all that is required for the gold price to incrementally work its way up year after year until the value of the global stock of gold is similar to the value of the global stock of paper money.

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I can easily see gold at $4,000 an ounce.

During a blow off top an asset can easily double in price, and that would almost get us to $4,000 based upon the current price.

I think a reasonable case can be made for why gold will continue to soar, but you can make an equally good case for how it has peaked and will collapse at some point.

That is why the PP is so attractive.  In either case, you should be ok.