Gold reached a record high of $1275 per ounce last week, up 400% from its 20-year low of $255 made in 2001. Gold's annualized trend growth rate from 2001 has been 18% (and 15% on an inflation-adjusted basis). While this strong trend shows no sign of slowing down, history shows that such growth is ultimately unsustainable and RiverFront's Price Matters analysis suggests that, from current levels, five-to ten-year returns will be disappointing. Despite this, after initiating a 1% position in gold in August, we increased exposure last week and now have a 2% weighting in our portfolios. We did this to help hedge our exposure to risk assets - reducing overall portfolio risk - rather than raising cash. Adding to inversely correlated assets like gold - whose value tends to rise when risk assets fall - should offer more downside protection per dollar than cash. Moreover, in the current global monetary policy environment, we believe gold can enhance our portfolios' returns.

Gold is something of an enigma.

David Fuller's view Read on for some additional interesting comments on gold in The Weekly View, plus thoughts on PPP and currency intervention.

What about that comment on gold: "RiverFront's Price Matters analysis suggests that, from current levels, five-to ten-year returns will be disappointing."

At some future point, surely RiverFront will be correct in this view. At no point in gold's monetary history has it risen to the sky and stayed there. Its price fluctuates, just like every other asset bought and sold by humans. One day, high interest rates and / or vertigo will burst gold's next bubble. However, Fullermoney remains on record for repeatedly saying that this secular bull market for bullion will end in an accelerating feeding frenzy. There is obviously no evidence of this at present.