Smart Money Investors Assess Gold Market
Given the recent extreme volatility in worldwide financial markets, Barron's interviewed their Roundtable Panelists for an assessment on where we are headed next. Three of the smart money investment pros interviewed gave their insights on where they think gold is headed next.
Here's what they had to say:
1. Investor Felix Zulauf thinks that the stock market will see new lows in the fall and that eventually both the Fed and the European Central Bank will step in to support the financial system. Although Felix feels that providing additional liquidity is not a solution, "if we don't do it the system will break down." According to Felix, at some point, as the problems get bigger, central banks may hit the panic button and wind up "like Zimbabwe". The increasing price of gold reflects the loss of confidence in policy makers, central banks and the currency. Felix's recommendation for a bleak future - "own a lot of gold, and don't have debt."
2. Fred Hickey, who is editor of The High-Tech Strategist, also sees the Fed being forced to initiate more quantitative easing as economic conditions deteriorate. The drawback of more money printing, however, is that "the Fed...can raise the nominal prices of assets - but not the real prices, because inflation will rise." Hickey, who owns both bullion and gold ETFs think the better play right now is in gold mining stocks since they have lagged the price increase in gold bullion. Hickey is recommending Agnico-Eagle Mines (AEM), Newmont Mining (NEM) and Yamana Gold (AUY).
3. Marc Faber, Editor of The Gloom, Boom & Doom Report, sees a short term bounce in stock prices and a possible correction in gold of $100 to $150. After a rally off oversold levels, Marc thinks stocks will drift lower due to concerns over sovereign defaults, a dollar crisis, continued social upheaval in the Middle East and developed countries in the West, recession, lower corporate profits and the possibility of a "bust in China." As for the gold market, Faber remains long term bullish saying that "As long as the trio of Obama, Geithner and Bernanke are in power, gold is destined to move higher. Long term treasuries have no value. They will default by paying interest in a worthless currency."
Bill Gross, head of investment firm Pimco, while not specifically addressing the gold market, is also bearish on the economic outlook for the the United States and implied that the more quantitative easing is the only option left. According to Gross, the recent Fed announcement that it will keep interest rates at zero for another two years "indicates that monetary policy has been exhausted, while fiscal policy is hammerlocked by the results of the debt ceiling debate."
Gold is beginning to look more and more like the only safe haven in a dangerous world.