Latest Example Of Gold Being Mainstreamed

is in USA Today, courtesy of a column by John Waggoner. He recommends holding 5% of an investment portfolio in gold. Although gold mutual funds are mentioned in passing, he recommends either physical gold or a physical-gold ETF. Waggoner does't see inflation on the horizon, and doesn't expect any this year, but he believes that an inflationary spiral will kick in once unemployment is lower. His case for a small portion of gold as an insurance hedge goes like this:

Gold prices are closely tied to the value of the U.S. dollar on the currency exchanges, however. When the dollar falls, gold tends to rise, and vice-versa. The dollar has fallen 46% vs. the euro since 1999.

The dollar has been gaining strength since December but only because other currencies look so awful. Investors have been dumping euros because they're worried about a default on Greek government bonds. They're buying dollars, if only because the U.S. seems more stable in comparison.

Keeping 5% or so of your portfolio in gold isn't a bad idea as a hedge against financial catastrophe. "It's the ultimate downside protection for events we can't forecast," says Rachel Benepe, co-manager of First Eagle Gold fund.

What's significant about this article is that he's a personal-finance columnist, not a goldbug or commodities commentator - and he says that gold as an insurance hedge is a good idea, to a mainstream audience. It's a far cry from the kind of excitement last seen at the climax of the 1970s gold bubble, but it's a small step towards that point.

We're becoming primed for a outright bubble; one of the antecedents is a large ramp-up in public awareness about the metal. Of course, the catalyst - a rip-roaring bull market that feeds off unexpectedly high inflation - is still lacking.