"Central banks around the world are debasing currencies at a rapid rate," he says
"On a long-term basis, gold is extremely undervalued, particularly relative to the proliferation of currency around the world," Hinde Capital CEO Ben Davies tells CNBC's Maria Bartiromo (at minute 00:58). Davies blames the recent outflows from gold on a false sense of security created by the weak European bank stress tests, which set the bar too low.
"Central banks around the world are debasing currencies at a rapid rate, and some of the more sophistated central bankers are have decided they want to move into gold," Davies says (at 1:22).
"Professional investors are beginning to understand that there's been a proliferation not only of currency but a proliferation of 'paper gold' derivatives, which actually act as a suppressor on the gold price. They are a function of central bank suppression," Davies says (at 2:08).
Unbacked exchange-traded funds, or ETFs, are flawed because the amount of gold they claim to own is not supported in reality. "If there was to be a wholesale call on those unallocated accounts, I think you might find that you don't have your gold," he says (at 3:10). "For every ounce that you have, probably multiples have been lent out or are being created as a derivative."
"So longer term, you have to own gold," Bartiromo responds (at 3:24).
In conclusion, look for Asian central banks to support gold over the long haul, Davies says. "We are seeing extraordinary debasement of currency, particularly the U.S.reserve currency. And what you're seeing is central banks like in Asia are just sick of this and don't want to keep funding - they don't want to be the creditor anymore - so they are moving into gold."
