Stash your gold away safe and sound, it’s still the best bet

Superfund is a managed futures hedge fund which trades in futures across a large number of markets. The fund trades both commodities futures and financial products. Aaron Smith, MD, Superfund Financial spoke to ET NOW.

Why do you believe that systematic investing is dead?

That was the investment strategy of the past century. The investment strategy of this century will be in systematic trading like managed futures funds, products that can give returns in bull as well as bear markets. The past decade has proved that equity markets are just a big roller coaster and no one can pick the bottoms or the tops perfectly.

So it is much more important to have a systematic trading strategy where portfolio managers, human emotions, are taken out of the equation and you are able to just follow the discipline. After all, 80% of the futures markets worldwide are already electronic.

Why are you super bullish on gold?

In 2004-2005, our founder Christian Baha had told me that he thought gold would go to $1000 per ounce. Now Christian believes that gold will trade easily at $2000 per ounce in the next three to five years. It is just a question of how much money is printed and we do not even know anymore how much money is being printed... Of the $5.1 trillion worth of gold in the world, $800 billion is in Indian households.

The temptation for Indian investors will be to sell when gold hits the 1,100-1,200-1,500 mark, but you would be best to put your gold away, put it in the safe, forget about it and let your grand-children have it and use it in the future.

What���s your own view on the dollar, going ahead?

It has gone straight down since 2001, with the exception of the first quarter of last year. The question is, what kind of effect will inflation have on all currencies. If you allow your local currency to get stronger against
the dollar, that is going to hurt your economy.

So all the economies around the world will be forced in this Catch 22 decision of whether to strengthen their currency, protect their purchasing power and kill their economy or depreciate their currency, which is I think is what they are more likely to do. The good thing about gold is gold has no GDP. It has no variables, it has no debt, so you can trust it.

Do you believe that soft commodities will see an exceptional run over the next few years? Or will they trade at the levels they are currently at?

That is another great reason to buy gold because it has 81% correla-tion to commodities since 1980. If you look at spot gold versus the Goldman Sachs commodity India index, that has a 81% correlation. Soft commodities have a tremendous upside.

At Superfund, we have long trading positions, technical trading positions in sugar and cocoa as well as other soft commodities. At the same time, we have taken short positions in some commodities like corn and wheat, where the trend for the past few months has actually been on the downside.

Besides gold, what asset classes would you advise diversifying into?

Well, agricultural land is a very good buy although it is difficult to purchase, and then we have liquidity issues. By 2050, 15% of the arable land in the world will not be farmable because of global warming.