By Tom Dyson

The amount of liquid savings I keep in gold would make the average investor choke.

In fact, on the occasions when I have told people how much of my money is in gold, they think I'm nuts. Gold represents more than 50% of my savings.

When folks hear that, they think I'm making a crazy speculation on the price of gold. Or they think I'm an eccentric.

I tell them gold is the safest place to keep your money. It's the modern equivalent of putting cash under the mattress. Gold is such a conservative investment, it doesn't even pay an interest rate.

Here is why I like gold:

To stave off the housing and credit crisis, politicians have increased the amount of paper (and electronic) money in our financial system. If you double the number of dollars in the system, then the market should make you pay double the number of dollars for an ounce of gold. If you increase the quantity of paper money by a factor of 20, the gold price should also rise by a factor of 20.

This is simple mathematics. It's the same calculation for tailored suits... loaves of bread... or rare seashells. Double the quantity of money, double the prices.

Chris Weber, the editor of the excellent Weber Global Opportunities Report, makes the calculation in the most recent issue of his newsletter. He adds up the value of all the paper money in the world... and comes up with $100 trillion. Then he divides this by the total amount of "above ground" gold in existence – 5 billion ounces – and finds a fair value of gold at $20,000 an ounce.

Total value of paper money
$100 trillion

Gold in existence
5 billion ounces

Theoretical fair value of gold
$20,000/ounce