In Overdrive to $1,000 Gold

Source: Barron's  (10/1/07)

John Hathaway, Senior Managing Director, Portfolio Manager, Tocqueville Asset Management: "Gold's bubble lies ahead. It has got a long way to inflate. So much about gold has very little to do with gold. It is more about capital-markets psychology."

As far back as last October, John Hathaway, Senior Managing Director, Portfolio Manager, Tocqueville Asset Management believed gold's breakaway performance from other commodities signaled rough times ahead for financial assets. That proved true, and that's the kind of insight that has led the Manhattan-based Hathaway's $1.1 billion Tocqueville Gold Fund to its own breakaway performance. The fund is up nearly 12% this year, versus 9% for the Standard & Poor's 500 and 17% for the XAU, the Philadelphia Exchange's Gold and Silver sector index, which has benefited from an overweight position in copper-producer Freeport-McMoRan (FCX)...

We ain't seen nothing yet if he's right about gold heading higher. Hathaway spoke with us from Colorado, where he was attending the industry-sponsored Denver Gold Forum...

Hathaway: Gold's bubble lies ahead. It has got a long way to inflate. So much about gold has very little to do with gold. It is more about capital-markets psychology. If we are entering a period of difficult markets, which was averted from happening earlier because the Fed pulled this 1% short-term money stunt and bought us a few more years, it is going to change psychology, and that will open the door for more people thinking about gold. What was needed to put gold in overdrive was the scent of fear.

What gets us to the magic number of a $1,000 an ounce?

I don't think it will take much. Let's not forget, in 1980 dollars, gold is less than half of its nominal price today.

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