Should Middle East investors be going for gold?

Indeed, the international guru and AME Info columnist Dr. Marc Faber has written a book called 'Tomorrows Gold' which was widely dismissed as eccentric when it appeared a year ago, but looks pretty sage today. The gold price has, after all, gone up from $250 to $400 per ounce.

Investors have to ask themselves, as ever, is that it? Is it all in the price? Some reckon a 30% plus run on gold funds this year is good enough for them and have decided to cash out.

However, the ever-wise Dr. Faber - who has a time-travelers flare for investment advice - is still bullish on the yellow metal. He used to like emerging market equities and real estate as well but has cooled his enthusiasm recently (Thai stocks slumped last week!). But on gold the bear of bears remains a bull.

To cut and paste a few of his ideas, Dr. Faber holds that a 20-year bear market in commodities was reversed at the turn of the Millennium. Whatever you look at, steel, coffee, oil or precious metals, they have all showed remarkable price advances since then.

Gold is not just another commodity but a traditional currency that can not be devalued by expanding supply, except over a very long period. Thus it is possible to argue that currencies and other commodities will devalue relative to gold and force the price up. It is the ultimate hedge against inflation.

Current geopolitical uncertainties in the Middle East, terrorism and the printing of money to finance the US trade and budget deficits also strengthen the allure of gold. So too does that fact that a billion Chinese will shortly be allowed to buy the stuff.

How do you hold it? Bullion looks pretty impressive but is very heavy and a security risk. Gold funds and gold mining companies are an alternative. Pick the biggest like Newmont Mining and you should not go too wrong.

Gold looks like becoming the next big investment theme, and that is usually a safe place to hide until everyone joins the party. Then amusement should be found elsewhere.