Europe’s financial crisis recently sent gold to a record high of about $1,250 an ounce. But the precious metal's skyrocket ride isn't over, says Ben Davies, manager of the Hinde Gold Fund.
“I think it goes beyond risk aversion and safe haven,” Davies says.
“For us it’s a cash supplement. It is money," he says.
"With central banks around the world denigrating their balance sheets at an alarming rate, there’s been such a proliferation of currency that that’s where the bubble is.”
Thus gold is extremely undervalued, he told CNBC.
As for how high the precious metal is headed, “I could be really obtuse and say $36, 000,” Davies said. Gold recently traded at about $1,219.
“But actually it’s not as ridiculous as it might sound, because if you took all the Fort Knox gold that’s purported to be there and revalued it at $36,000 an ounce, that would pay off all the debts in the U.S.”
That debt probably totals 600 percent of GDP when unlimited liabilities are included. The standard measure of the government debt-to-GDP ratio stood at 56 percent last year.
Gold demand also will come from emerging market countries seeking to boost their reserves, Davies says.
His forecast makes other gold bulls look bearish.
Ambrose Evans-Pritchard, international business editor of London’s Daily Telegraph, tells Newsmax.TV Money that the global debt crisis will help gold.
“The gold price could go a lot further still. It wouldn’t surprise me if it was $2,000 or $3,000.”
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