Gold’s Undervalued Says Paul Tudor Jones
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Hedge fund manager and legendary trader Paul Tudor Jones in a recent report said his model has determined that gold is 20% undervalued over the next 24 months. This takes into consideration real rates on the price of gold, inflation, and M2 growth. Tudor expects the velocity of money to rise over the next two years, enhancing the bullish case for gold.
Additionally, they also cite the supply/demand equation and prudently bring up the fact that a new class of investors has arrived: retail investors gaining access to the metal through exchange traded funds (most notably GLD).
Tudor highlights another important factor in the gold equation: central banks. He notes that in the second half of this year, the ‘official sector will become a net buyer of gold.
The question is, how much of gold is a hedge against inflation, and how much of gold is just another commodity, subject to the same fate as all other commodities over the last few months? What is the percentage, and how do we calculate it? I’m sick of hearing about how the price of paper money is manipulated.
Australian Gold
Gold has two values: the actual use value in industry, and speculative value. As the former is less than 1/10th of the latter, it’s a pretty poor investment, relying on the greater fool theory.
Gold Nuggets
If gold is so useless why does the US have 262 million ounces in their vaults? Why does the Federal Reserve keep other countries gold stores in their vault in NY? Gold is a type of currency onto itself, it’s a fallback. Right now China, India and Russia barely have any gold reserves. You will soon be seeing Gold buying by these countries as a shore to their currency.
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