Stake a Gold Claim for the Long Haul

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"True gold believers remain convinced its best days lie ahead."

July rarely inspires fond memories among the gold crowd, and the month just ended was no exception.

Along with gold's usual summer doldrums, the metal took a direct hit from receding fears of a sovereign debt disaster, strengthening currencies and a renewed appetite for risk.

Gold plumbed a three-month low and investors fled previously booming exchange-traded gold funds at a pace not seen since the spring of 2009.

You could hear metal detractors humming The Party's Over.

But even perennial critics acknowledge that it might be a tad premature to write the ending for the latest gold rush. And as if on cue, the metal regained some lost ground on Friday, prompting one Chicago analyst to tell Bloomberg that "the correction may have run its course."

True gold believers remain more convinced than ever that its best days lie ahead, if only because its value as a safeguard against all manner of political, economic and currency-related calamities is surely going to rise in the troubled years to come. In a world full of unknowns, it seems only natural to gravitate to the oldest of wealth preservers, even if, like me, you have a natural aversion to anything that doesn't earn interest or pay dividends.

To say gold doesn't have a role in a diversified portfolio today requires people to conclude that the politicians really know what they're doing and have the deteriorating fiscal situation well under control, argues John Hathaway, portfolio manager of the Tocqueville Gold Fund since its inception a dozen years ago.

Once you make the perfectly rational assumption that the fiscal woes and questions over the trustworthiness of government paper assets, including sovereign debt and currencies, are here to stay "within a reasonable investable timeframe," it makes sense to have some gold exposure, he says.

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