Will Gold be Paulson's Next 'Greatest Trade Ever?'

And the World Gold Council expects China's jewelry and investment demand to continue at a frenetic 20% growth pace this year.

Seeking Shelter in Gold

None of this should come as much of a surprise.

China in particular, holds a $1.1 trillion hot potato in US debt. But China's US debt holdings have declined by $73 billion since July. Russia's holdings have also seen a significant decrease to $88 billion from $127 billion last March.

Increasingly, emerging market central banks have been the most aggressive buyers of gold.

According to the WGC central banks are wary of the reserves they hold, most of which are denominated in fiat dollars and euros. Ongoing sovereign bond downgrades and low yields have helped push developing nation central bankers to seek shelter in gold.

Large holders of quickly depreciating western debt are becoming apprehensive. They're looking for alternatives that will retain and grow their value.

There are ever more attempts by eastern creditors at buying up hard assets.

So I expect stepped-up efforts by developing nations' central banks to acquire and hoard gold. I also expect Asian companies and sovereign wealth funds to buy significant stakes in hard assets like energy, base metals, and especially gold producers.

As the demand for gold continues to climb, its scarcity will become a major factor. Those who want exposure to gold will look progressively toward gold stocks.

Right now, gold equities are trading at levels near the lows of early 2009 relative to the gold price.

 

At current prices, gold stocks are historically very cheap, and certainly worthy of consideration by all investors who think they are under-allocated in this sector.

That being said, the ultimate safe haven is physical gold itself. In fact, over time, today's price of $1,750/oz. is going to be looked upon as a bargain.

Here's why...

Even when gold prices do drop significantly, savvy investors refuse to relinquish their holdings.

Today, the allure of gold is not only gaining momentum- but it's maintaining its current rise.

The way I see it, now's your chance to grab your piece of the next "Greatest Trade Ever."

Peter Krauth is global resources specialist with Money Morning. He is a market analyst and expert in metals and mining stocks, with a special expertise in energy and resource-related investments. A one-time portfolio advisor who earned an MBA in finance from McGill University, Krauth is based in Canada.

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About the Author
Peter Krauth

Peter Krauth is global resources specialist with Money Morning. He is a former portfolio adviser and a 20-year veteran of the resource market - with special expertise in energy, metals, and mining stocks. Peter uses the connections he amassed over the years to exploit the moneymaking potential of every kind of commodity. As editor of Real Asset Returns, he travels around the world to dig up the latest and greatest profit opportunity. A one-time portfolio advisor who earned an MBA in finance from McGill University, Krauth is based in Canada.

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