Gold may be the best investment option today

Hats off to Dr Marc Faber, our celebrated AME Info columnist, who once again got his investment call spot on target. Indeed, he published a book entitled 'Tomorrow's Gold' in December 2002 which lays out the case for investing in the yellow metal.

If you don't own a copy, then buy one from www.amazon.com - this could be your best ever investment!

Dr. Faber's theme is the classic hedge against inflation and global financial mayhem argument, mixed with an economic historian's appreciation of business cycles and commodity prices.

The link between the oil price and gold is well established. Gold was at its previous high of $800 an ounce in 1980 when oil was past $100 a barrel in today's money. Thus in real terms gold prices should be twice as high as they are today when compared with oil prices.

So if you accept that high oil prices are here to stay - and an increasing number of analysts now fall into this camp - then much higher gold prices are also on the way.

Gaining exposure to gold is as easy as taking your wife to a jewellery shop, particularly in the UAE where such items are sold at a small margin over the gold price.

On the other hand, buying gold in quantity is a different matter. It is very heavy and an obvious security risk, although it does not deteriorate in storage - have a look at the treasures of the tomb of Tutankhamen in Cairo as proof of the longevity of this asset.

A better option is the purchase of shares. Newmont Mining is the biggest gold miner in the world and quoted on the NYSE, but there are a host of others worth considering. Newmont has the advantage of not hedging its prices, so that the full gain, or loss, of the changing gold price is reflected in the share price.

Some potential investors are put off by the fact that gold has gained 60% in value in the past two years. The argument is that gold may have had its day - and indeed unless you bought and acted upon Dr. Faber's advice, you have missed some of the upside.

But if the bulls are right then you could still double your money. Gold is a great hedge against inflation which is surely what high oil prices, a falling dollar and budget deficits imply. The supply of gold is fixed, while dollars can be printed relatively quickly.

There is also the Wall Street factor to consider. Where will share prices go if inflation is going to hit profits? We have already seen lower borrowing begin to hit US consumer spending habits. Highly valued US stocks could crash, and then gold is a safe haven.