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Jim Rogers Sees Gold Cross $2,000, and My Contrarian View on Silver
By Dian L. Chu, Economic Forecasts & Opinions
In an exclusive interview with CNBC on Monday, Oct. 4, Jim Rogers talks about commodities, bond and the currency market.
Commodities to Outshine Stocks and Bonds
Because of the global central banks’ money printing express, Rogers says commodities will outperform equities regardless if the economy recovers or not. However, not all commodities are created equal, he points out in the case of aluminum, whose price is lagging mostly due to the increased capacity in China.
He advises investors to look for commodities that are still cheap. From that perspective, he sees opportunity in sugar and rice. Overall, Rogers thinks agriculture has a "wonderful future" in the next 5-15 years due to diminishing farming activity around the world.
Rogers also sees a U.S. bond bubble and indicates although he is not shorting the U.S. Treasury in any "significant way" yet, he may not wait much longer.
Gold - $2,000 in Five to Ten Years
"Gold is going to go a lot higher over the next decade. It may slow down for a while because it's run up so dramatically here in the last few weeks. But gold's going to be much higher. Adjusted for inflation it should be well over $2,000 now."
Rogers says gold will continue to gain on the failed monetary policies of the U.S. government. In precious metal, from a valuation standpoint, he thinks silver would be a better investment than gold right now as it is still 60 percent below its all-time highs, while gold keeps making all-time highs. But he also tells investors holding onto gold and not to take profit at this juncture. He owns both metals.
On U.S. Dollar & Brazil
Rogers said based on experience, he's found in life it is better to be a contrarian. Applying that philosophy, Rogers does not think he would sell any more US dollar at this time, and if anything, he might contemplate buying instead, since everyone is so pessimistic about the dollar right now.
He also said he owns some Chinese, Malaysian shares and some international airlines, but cautions against jumping on the "moving ship" of Brazil.
My Contrarian Take on Silver
Rogers has been quite consistently long on agriculture, gold and silver for the past year or so. I generally tend to agree that gold and commodities could head higher driven by the fear factors like currency debase and inflation arising out of the global monetary QE1 and incoming QE 2.
However, with regards to silver, I am going to be a contrarian this time around.
Gold has had a spectacular 20% run-up this year hitting new all time highs, but it pales in comparison to silver. On Monday, spot silver prices shot up to $22.13 an ounce, a fresh 30-year high, up a staggering 31% this year.
On the surface, Rogers has a point that silver is still a long off its all time high, which was reached in 1980 when the Hunt brothers decided to buy up almost a third world’s deliverable supply of silver as a hedge against inflation. Within one year, silver went from $5 to peaking at $54 in 1980. Ultimately, COMEX and Federal Reserve intervened resulting in the collapse of the silver market.
Now that we've had a crash course on the history of sliver, it should not take long for one to realize that, in contrast to gold, there’s very little chance for silver to touch, let along surpass that all-time-high mark.
Furthermore, since both gold and silver are part of the precious metals family, silver has been attracting interest of fund managers as a cheaper alternative to gold. But unlike gold, silver is also a base metal, since around 40% of the silver supply in 2009 was used in industrial applications such as electronics manufacturing.
So, silver, more base metal than precious metal, has essentially been piggyback on gold as an investment metal based on attractive valuation relative to gold. However, silver is called “’Poor Man’s Gold” for a reason, as it has by no means the similar stature and glitter of gold in terms of wealth preservation and being the ultimate safe haven.
And as the current price level seems to suggest quite a bit of "faux" fear premium has built in, the white metal appears overbought and could be heading towards a bubble stage.
Video Source: CNBC?
Dian L. Chu, Oct. 4, 2010
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+1. its a lot easier to take 1 bar of gold on a plane versus 50 bars of silver, if you have to skeedaddle off to somewhere, that is.
This. People may take silver when they won't take paper or crappy zinc alloys for payment.
Wow, that's a "contrarian view?" You base your entire view on silver on the Hunt brothers?
I'm sorry, that is a lightweight view. You really should study the broader silver market before making such bold statements. Or at least read some of Adam Hamilton's posts on the subject.
You picked a great day to be bold though! Silver just closed up a buck.
Would have been nice to include Newton and his actions as Master of the Mint in the 1700s.
"My Contrarian Take on Silver"
As for an opinion containing little or no logical or factual substance, I think it is more than a Freudian slip that Dian mispells Silver at the critical point in her argument, spelling it as "sliver." I wonder if she is part of the massive Primary dealer short position and the comex commercials that are staining their pants? Here is the substance of her agrument and point where she calls silver "sliver."
"Now that we've had a crash course on the history of sliver, it should not take long for one to realize that, in contrast to gold, there’s very little chance for silver to touch, let along surpass that all-time-high mark."
Now, a little common sense is called for in analyzing this. There is somewhere around 1/10th as much available above ground silver now as there was when the Hunts tried to corner the tiny silver market.
Furthermore, the $50 high she says silver can never hit again is in non-inflation adjusted dollars. The inflation adjusted high would be closer to $300.
She points out that unlike gold, silver is both a monetary metal and a highly useful technological, medical and energy based industrial commodity.
She conveniently overlooks the fact that the funds and other financial entities are waking up to the fact the exchanges and derivatives markets to silver are highly leveraged and that silver prices are a catalyst to gold prices and vis. versa.
Silver being a very tiny market compared to gold and most other commodities makes it a very convenient lever to influence gold prices by taking physical delivery of silver and gold as well.
Silver, like gold, has been and remains hard cold cash and the move towards reliable money and long term insurance against devaluatoin accelerates the demand side will have even more impact on the tiny physical silver market.
Dian, I hope my commentary isn't a "sliver" in your thesis.
Duffminster
During the Weimar hyperinflation the gold silver ratio went from 1:14 to 1:160. During the great depression in the U.S. gold also outperformed silver. Metals that are commodities don't make good monetary metals because of their declining supplies. All the silver experts out there tend to rely on the single period in the 1970s-80 to base their decision on. Silver was unmonetized during the 1900s more than it was monetized.
I'm 2:1 weighted silver to gold, but am constantly reassessing.
During the Great Depression in the US, gold did outperform silver. That was because the price of gold was FIXED by the US government and not allowed to decline. What is more interesting to note is that the price of silver collapsed along with the price of every other commodity. Do not be misled by the stable dollar price of gold during that period.
I suspect that gold and silver will perform much like the Weimar experience you cite, if there is a round of hyper inflation in the US.
I agree and the perception doesn't always meet the reality. When people realize where silver is and where it should be there will be massive flow into silver.
Cite please
Good time for eurogoldsilver bugs to load up now,
think te discount is about 100-150 euro in gold.
Silver still a buy with spot just above 16 euro.
What is a fair value for silver? $11 / oz?
How about a fair ratio to housing? 20,000 ounces for a median home?
Lets get real.
FMV for Slvr should be around 40-1.
JPM, has held the foot on the neck of Slvr for eva.
No WAY is it 60-1, we will see it settle at around 40-50-1,before it's over.
There may be one, but I cannot think of ONE metal that can be used for so many things, and is still MONEY.
Markets tend to overshoot so it will most likely go under the 10:1 ratio or to that ratio and then correct. 15:1 or 16:1 is historic but silver is very undervalued so even 5:1 or 1:1 wouldn't surprise me and perhaps even silver surpassing gold would not shock me.
What is the true value of a median home?
EP-125,000$(adjusted for inflation) is median house price in the USA over the last 100 years.
Depends on how many beans and corn you ate last night.
$13,000
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2010/10/5_Be...$13,000.html
PS................$2000 by Christmas
id agree with the 13K sooner than the 2K by christmas, but sure either are possible. When people ask for gold price targets, i stress that whatever the number is, that it will shock (as a necessary result of the unwind of shocking monetary/fiscal conditions). To me 5K wouldnt be shocking, but 13k probably would be. Also shocking would be the stone age scenario, where i suppose the spot price would be anywhere from 0 to infinity, depending on the situation in your own local or very local market.
Your negative view on silver is all wrong... I really don't care about the old high in the 80s and the reason for it. Actual physical silver is running out. Unlike gold, it gets consumed. There is less of it out there than gold right now. So, from either a industrial (all those computers) or investment (all those coins and bars), it's demand is increasing (more than offsetting the reduced use in photo film).
Good luck if you are short Silver (like JPM). I'm taking the other side of that trade.
Trend Analysis points to at least 28 or 29 on silver... and thats not including any mania or squeezes-- the longer the base the bigger the breakout. The fact that it is both industrial and and a PM gives some pretty big support. Now in a HUGE depression the industrial demand would disappear but that certainly isn't your thesis on this or any of your other posts. Again you have done piss poor research but I respect your tenacity and guess you don't read your feedback. You should read some books on trend... things usually trend for a reason... supply vs. demand like your HPQ that is in an ugly downtrend in a bull market.
Funny how the author thinks silver's industrial usage in addition to monetary usage makes it less valuable. Industrial usage means that it's consumed (unlike gold), which in term means its supply is getting less until its price is high enough to justify recovering and recycling the consumed silver.
You are so right. I take about 1 hour a day to look for good trades in silver.
I might be overdoing it a bit but I'm also pretty sure we'll hit 50 to 80$ in the next 6 to 12 months.
Let's see what the QE2 will do to the gold and silver prices.
sterling piece from Chu here... reminds me of this one
http://www.youtube.com/watch?v=AqWzUQ8lp3M
Right you are. If the author of the post had any real information about the current silver supply situation, she wouldn't post stupid stuff like this. In the meantime, let's hope she shorts a ton, pushes the price down a bit, so I can buy.
I would suggest she is just putting out a disinformation piece. I can't imagine someone with Chinese heritage dismissing silver so lightly.