Gold’s climb is perfectly rational

FORTUNE — After taking a breather there for a few months, gold prices have resumed their seemingly inexorable rise to infinity. Amidst the mayhem of last week, the metal briefly touched $1,800-per-ounce before sliding back to $1,770 as the stock market rebounded. Those “cash-for-gold” signs you used to see only in distressed neighborhoods? Don’t look now, but your mother was probably selling a few sets of earrings last week.

To get a read on things, Fortune caught up with Rachel Benepe, co-manager of the $3.1 billion First Eagle Gold Fund (SGGDX). Along with Abhay Deshpande, Benepe stepped into the very big shoes of Jean-Marie Eveillard when he transitioned to a senior advisor role at the fund in March 2009. And they haven’t tarnished the fund’s reputation yet: Had you invested $10,000 in the fund five years ago—which only requires a minimum of $2,500—you would be sitting on $18,766 today, as opposed to losing money in the S&P 500.

Let’s get right to the point. Are people insane to be buying gold at these levels?

We don’t forecast the price of gold, and that’s because we view it as a hedge. Considered from that perspective, no one can really say if it’s too expensive or not, as long as the price moves for rational reasons. Look at the price changes since Lehman failed in 2008. Every move of gold has happened for a rational reason. We haven’t seen a single move out of context. Last week, there were obvious issues in the U.S. and Europe that kind of came out of left field, and gold hit $1,800. Is someone insane for wanting to protect their portfolio? I don’t think so. Keep in mind, too, that more and more people are becoming aware that it can serve as hedge. That, too, has been driving up the price. But to say it’s mispriced is the wrong way to look at it. It protects your purchasing power. Gold should go up when equities down. It doesn’t matter which way it’s moving, either, as long as it’s happening in a rational way.

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