Where is gold headed? When is the good time to buy it?
Of late, India has taken a slew of measures to curb its import. Many
say that if India were to steeply reduce its import of gold, it will be
able to alleviate its current account deficit, which, in turn, would
help its economy get back on track?
Jim Rogers : It is a great question because I too am fascinated with
gold and I do own gold. Gold went up 12 years in a row, which is
extremely unusual, and there has been no asset in history that has seen
something like this. The anomaly in the gold market is how strong it has
been—it has never happened ever—technically, gold was overdue for a big
correction. But the correction should be different from most
corrections because the rise was so different from most rises. I was
expecting it to decline and it has.
In my view, the main reason for the correction, other
than the fact that it needed it, was on account of Indian politicians
who suddenly blamed their problems on gold. The three largest imports to
India are crude oil, gold and cooking oil. Since they can’t do anything
about crude and vegetable oil, the politicians said India’s problems
were because of gold, which, in my view, is totally outrageous.
But like all politicians across the world, the Indians
too needed a scapegoat. Is this the reason why gold started correcting? I
don’t know. But, India is the largest importer of gold, and whenever
the largest buyer cuts back, there will be a correction, whatever is the
commodity. The correction may continue for several more weeks, months
or even a year or two. A 50% correction is common for commodities, but
if gold were to correct 50% before it made its final bottom, that would
be between $900-1,000.
In my view, gold is in the process of making a
complicated bottom that will last a while. I hope that I am smart enough
to buy more near the bottom because gold will go much higher over the
next decade, because as I had said earlier, governments across the globe
are making mistakes of printing money. When gold went to $1,200, I did
buy more. But don’t sell your gold. I am not selling my gold.
If India curbs its gold imports, will its economy be back
on track? There is no question that if you have money, it is better to
invest it than put it into a stagnant asset—according to this argument,
women should not buy dresses or shoes, or we should not be buying
houses...the one billion Indians are smarter than the market and also
the government. If they see that they are better off putting their money
in gold, that is what they will do—the solution is not a ban on gold
(import), but to make the economy exciting enough to make people want to
put their money into other things. That will be better for the economy,
but this is putting the chicken before the egg or the cart before the
horse. - in livemint
Jim Rogers started trading the stock market with $600 in 1968.In 1973 he formed the Quantum Fund with the legendary investor George Soros before retiring, a multi millionaire at the age of 37. Rogers and Soros helped steer the fund to a miraculous 4,200% return over the 10 year span of the fund while the S&P 500 returned just 47%.