Hedge fund manager Hugh Hendry cannot be accused of mincing his words. He flatly says he's avoiding gold and instead favoring government bonds.

Hendry runs the macro fund Eclectica Asset Management. At the end of July, the fund led its category at a 13.55 percent year-to-date return, according to Bloomberg News.

"I expect bad things are going to happen — further bad things. I think the most productive use for speculators today is to conceive of what are the worst possible economic outcomes," he tells The Scotsman in an interview.

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