Gold futures are well off their 52-week high of $1,804 per ounce. They are currently at about $1,394.50 per ounce.
Hedge fund manager Doug Kass thinks it's a great time to buy gold.
"There is probably no better time to consider diversifying one's portfolio into a depressed asset class (e.g., gold) than when the crowd is optimistic about a vigorous and self-sustaining global economic recovery and when the world's stock markets are at record high prices," writes Kass in a Real Money column (via The Street).
Gold is currently his "largest long."
Here's his argument:
- Expectations for the price of gold are low and has "contrarian appeal."
- "Last month's gold selloff looks like a selling price and volume climax." The price collapse in mid-April saw an "8 standard deviation event, which occurs statistically about every billion years."
- Shorts on gold have grown and there is potential for short squeeze and demand from short sellers.
- Global economic growth recovery projections are too optimistic.
- U.S. dollar strength may start to fade and currencies of "all major countries" are like to weaken.
- Inflation "seems inevitable" and this should prop up gold prices.
- There are still tail risks out there. "I view an upcoming "aha moment," in which it becomes recognized that easing is losing its impact as the Fed is pushing on a string. Again, QE might be with us for a lot longer than many anticipate."
- Demand for physical gold is rising.
Kass bought bought SPDR Gold Trust in pre-market trading last week.
More From Business Insider