The Rational Gold Investor
“With gold accounting for so little of global assets, McGuire says, only a small shift in asset preferences — from currencies to gold or bonds to gold — would cause a major price increase in gold. Unlike most gold bugs, he is not talking about financial Armageddon. He’s simply talking about decisions by institutions, pensions and sovereign wealth funds to sell some bonds and put the cash in gold…
And that’s the rub. Gold viewed as money is like the liquid reserves in our current monetary regime. If we return to a ratio that is fitting for the current outlook for the credit cycle, gold could hit a ratio of 25:1 (or 4% of total assets). That is you don’t have to have the view I have to see a major increase in its relative value.