With the outbreak of fighting between Iraq and Iran pushing gold -- frequently the beneficiary of world turmoil -- over the $700 level, the questions of how high it can go and how long it will stay there are with us again. Should it be bought, sold . . . or simply ignored?

One of Wall Street's most respected gold minds -- in a recent whirlwind trip through Texas -- told some of the state's biggest institutional investors to waste no time in puttig about 16 percent of their assets into gold-related securities.

At the same time, however, he told them that gold -- even at $300 an ounce -- is "unquestionably overvalued on fundamentals" and could easily drop to $550 within the next six months.

This crazy set of contradictory views is put forth by Andre Sharon, 44, the head of institutional research for brokerage biggie Drexel burnham Lambert.

But to Sharon, a close follower of gold the past nine years, his words are not confusing at all.

"We're in a recession here in Europe, and that should be bad for gold because it lessens inflation," he observes. "But I'm not smart enough to know when politicians will reaccelerate inflation to get their economies moving again or when the Russians will be marching their troops into another country. And unless one's a genius who knows exactly what's going to happen, you must own gold as an insurance policy . . . "

Sharon firmly believes that a 10 percent to 20 percent gold position has become mandatory for investors. He also says the day is over for the "buy America only" strategy. "You do that and inflation will eat you up alive," he adds. The minimum investment goal should always be to at least preserve your purchasing power, and this is no longer possible to achieve with conventional investments like U.S. stocks and bonds."

In arguing his case -- which calls for strong consideration of both gold and foreign securities -- Sharon related the performances of several investments of $1,000 each between 1971 and 1979. In his exercise, he has added in stock dividends, deducted 50 percent for taxes and reduced the value of the remaining assets by the annual inflation rate. In the case of gold -- which Americans weren't allowed to purchase until January of 1975 -- Sharon factored in a maximum capital gains tax of 28 percent.

Here's how they would have fared in real dollar terms. The $1,000 put in the Dow Jones Industrials would have been worth $718; the Standard & &oor's 500-stock index, $693.90. In gold bullion? You'rew way ahead with $5,287.64. Interestingly, a group of Swiss securities would have declined 7.9 percent between '71 and '79. But because the Swiss franc appreciated 146 percent against the dollar in the nine-year period, your $1,000 in Swiss securities would be worth 126 percent more, ore $2,260.

In pitching gold, Sharon urges a hedging strategy -- one in which 40 percent of the gold investment goes into South African gold mining shares (many of which offer hefty 20 percent-plus annual yields). He favors mines of longer life (more than 20 years) and intermediate life (15 to 20 years) since they'd be least vulnerable to a declining gold price.

His three favorites (all longer-life mines): East Driefontein, Western Deep Level and Vaal Reefs. In the intermediate-term category, he likes West Driefontein, Kinross and President Steyn.

Sharon hastens to point out that even should gold drop to $550, these gold share yields still would run a fat 10 percent to 19 percent over the next two quarters, thus tempering any stock price declines.

But what about racial problems in South Africa mines?

Sharon factors in such a possibility by pitching a 55 percent gold position in the gold bullion itself, notably South African Krugerrands and Canadian Maple Leafs. He notes that while South African shares would plummet in the face of racial turmoil in the mines, the bullion, in turn, would skyrocket because of worldwide fears about future supply. North American gold shares, namely, Dome Mines, Campbell Red Lake and Homestakes Mining, make up the remaining 5 percent of Sharon's recommended gold position.

The soundness of Sharon's strategy is anybody's guess. Over the long run, he has compiled a better-than-average record of calling gold price movements (although he did recommend some profit-taking in '79 when gold was around $280). Still, the thought of that $550 he's predicting has to bother any would-be gold buyer.

Sharon himself adds to that concern with the assertion that we'd have a gold glut if it wasn't for panic buying because of fears of new Russian aggression and worries of stimuative economic policies here and abroad to offset the business slowdowns.

But after all this negative talk, Sharon turns right around and tells me he expects gold to top $1,000 in the next year or two. His reasoning: He's deeply skeptical about the abilityh of nations to control inflation, to reduce consumption and to increase capital investments. And he's also worried about political stability in such strategic regions as South Africa and the Middle East.

What should you do? I'll let you decide whether you ought to put some greenbacks into gold. As for me, I find it hard to refute Sharon's repeated argument that the name of the investment game is to preserve your purchasing power.