On a recent trip to London Jim Rogers, the legendary maverick investor, took time to talk with Every Investor about investing in gold. Below are excerpts from the interview.
Chris Menon: Is gold worth buying at current levels?
Jim Rogers: I am not buying gold at current prices. I own gold, I own silver, but I am not buying at this point. I expect there to be another chance to buy gold, sometime in the next year or two, and I hope I am smart enough to buy it.
[amazon asin=0307986071&template=*lrc ad (left)]Chris Menon: You expect it to go much lower?
Jim Rogers: I don’t know. I’m not very good at market timing or trading. This is not a prediction, but I would remind you that it is normal in markets for things to have 50% corrections every 3 or 4 years at least. Well, gold has not had a 50% correction in over a decade, maybe 15 years. That is very, very unusual in any market. The anomaly is that gold has been acting perhaps stronger than most markets do.
Now, if gold were to go down 50%, and this is not a prediction, it would be US$960 per ounce. If it goes to $1000 I hope I’m smart enough to buy more and a lot more.
I just mention the point that it is abnormal what gold has been doing for the past 10 or 15 years. So, I expect another chance to buy gold, at what price I have no idea.[amazon asin=0812973712&template=*lrc ad (right)]
If America goes to war with Iran I’ll buy at $1600 and be happy to get it, if I can get it.
So, when I say another chance to buy gold I am not so much making a price prediction as saying there will be another chance to buy gold.
Chris Menon: I recently spoke with a fund manager who told me that gold is now in ‘backwardation’ and that is meant to be a bullish sign for the gold market. What is your view on ‘backwardation’?
Jim Rogers: Yes, it’s in backwardation. And if he says that is going to make it go up, well he may know more than I do. But I would also make the point that gold has not had a 50% correction even once in the past 15 years. So, [amazon asin=1400067545&template=*lrc ad (left)]whether this backwardation means that we should buy it now or not, I don’t know.
My point is that there have been some abnormal things. Gold went up 12 years in a row, that’s very, very strange. I know of very few assets in history that have gone up 12 years in a row without a decline.
So the action in gold for the past 15 years has been the aberration. Perhaps the consolidation of the correction is an aberration as well.
So, if he’s right obviously one should buy gold now. If one is going to buy gold now, obviously he should buy the backwardation, he should not buy spot. But I am not buying either at the moment.
Chris Menon: For a novice investor wondering whether they should buy gold now, what would your advice be?[amazon asin=B007KTEBO0&template=*lrc ad (right)]
Jim Rogers: I am not buying gold at the moment and everyone should make their own decisions. Now, I will say if there are people who own no gold, they should certainly buy some gold before too much longer. Everyone should own some gold as an insurance policy if nothing else.
Everybody has car insurance and fire insurance. You hope you never use it. Well, everyone should have some gold in the same way.
I buy gold as an insurance policy but also because I hope to make money, and a lot of money, someday.
If people do not have any gold yet, they should find a time when it’s going down to buy some, because everyone should have some gold as an insurance policy if nothing else.
Chris Menon: You are bullish on the prospects for gold on a 10-year horizon, aren’t you?
Jim Rogers: I certainly expect gold to go much, much higher over the next decade. We are going to have a lot of currency turmoil, a lot of political turmoil, maybe military turmoil, economic turmoil and I certainly expect there to be opportunities in the gold market.
