Gold is the most controversial and misunderstood asset in the financial markets. Volatility and two decades of relative financial calm have hidden gold�s potential value from investors, especially during periods of uncertainty and growing distrust of authorities to stabilize global markets.
Now that gold has achieved nine straight years of gains amid declines in the market valuations of other more popular and understood investment classes such as stocks and real estate, a growing number of investors are taking another look at the virtues of the yellow metal.
The world�s largest investors, hedge fund managers, lead the community of money managers taking a shining to the world�s longest-lasting asset known for its durable store of value.
“The outlook for gold is very, very strong,” Evy Hambro, co-chief investment officer of BlackRock�s natural resources equity team, said to Reuters.
BlackRock’s Hambro clears up the misconception that gold is too volatile for the conservative investor, comparing it to the value of the money in your wallet against other money in the wallets of people overseas.
�Gold is certainly nowhere near as volatile as the moves we’ve seen in currencies,� Hambro added. �Look at the euro!�
As of overseas trading in Europe Tuesday morning, gold trades at US$1,219 per Troy ounce, while the euro tests its recent lows against the dollar at 1.21, down nearly 15% for the year.
Contrastingly, it now takes approximately 9% more dollars to buy a Troy ounce of gold from its 2010 opening price of US$1,117, according to gold dealer Kitco.com.
John Paulson, the prominent and world�s largest private hedge fund manager who made $3 billion shorting debt securities during the financial meltdown, is now making a similarly large bet on the fate of the U.S. dollar.
Paulson expects the massive stimulus injected into the financial system from central bankers globally will translate into higher consumer prices down the road as politicians balk at any plan to reign in money supply and threaten any hope of a sustained economic recovery.
�Therefore, we are concerned about high rates of inflation in the future. As an investor I became very concerned about having my assets denominated in U.S. dollars,� Paulson said at a luncheon at the Japan Society.
�So I looked for another currency in which to denominate my assets in. I feel that gold is the best currency.�
At the close of the first quarter of 2010, Paulson reported his largest position is 31.5 million shares of SPDR Gold Trust (GLD) valued at approximately US$3.8 billion.
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