Panicky investors may be dumping their gold, but one investor with a superb long term track record of value investing is loading up on gold bullion.

In a Fortune interview, Charles de Vaulx, who runs the IVA Worldwide Fund, explains why his $10 billion fund holds over 7% in gold bullion.

At the time of the interview, gold was selling at $1,900 per ounce and de Vaulx was bullish based on a “mistrust of policymakers, be they in the U.S., Europe, Japan, or even China.”  The inability of politicians to arrive at agreements in the face of a looming debt crisis gives gold an inherent value that paper currencies do not possess.  As to why he would still be buying gold after a sevenfold rise since 2001, de Vaulx said that “the paradox with gold is that even though the price has gone up so much, it is still under-owned.” (See Americans Remain Underinvested In Gold.)  The IVA Fund has invested only in gold bullion which is viewed as being “safer and cheaper” than gold mining stocks.

Regarding the U.S. dollar, de Vaulx thinks that over the long term, the U.S. will be forced to solve its massive debt problems through currency debasement and inflation.   Initially, the bursting of a credit bubble causes deflationary problems but ultimately the policies of the Federal Reserve will produce inflation.  Fed policies will accordingly result in poor returns for bond investors who have sought shelter in U.S. treasury securities.

The circumstances under which de Vaulx would reduce his gold positions would be if policy makers are able to institute policies that would encourage sound currencies or if the values of equities become “truly cheap.”

According to Fortune, de Vaulx launched his fund only three years ago.   Based on a long term track record of superior investment returns, de Vaulx was able to quickly attract $10 billion in assets.  Due to the recent panic sell off in the gold market, de Vaulx’s fund has taken a hit, but my bet is that de Vaulx is taking advantage of the situation by scooping up more gold at bargain prices.