Jim Rogers, the famous contrarian investor, stands behind his prediction that gold prices will hit $2,000 (U.S.), but isn't buying any more gold at record highs.
Rogers has been a gold bull for years and well before this year's 25 per cent rally. There are many ways to buy gold like the gold exchange-traded fund, SPDR Gold Shares , up 24 per cent; gold stocks like the Market Vectors Gold Miners , a basket of large-cap miners, up 30 per cent; or physical gold. Rogers favors the physical commodity.
Some analysts disagree with Rogers. Goldman Sachs called a top in gold at $1,750 sometime in 2012, while Jon Nadler, senior analyst at Kitco.com, says the top could come in 2011, especially as prices struggle to sustain prices above $1,400.
I recently sat down with Rogers to see when he thought gold prices would break $2,000 and how he would buy the precious metals market.
Now, you've said that gold will hit $2,000. Do you know when -- crystal ball?
Rogers: I wish I knew when, watch TheStreet.com you can get all these answers to market timing; I am no good at it. I explained to you that gold will be $2,000 certainly in the decade, it'll probably be much higher than $2,000 in the decade but maybe even sooner I don't know. But to me it seems pretty clear that it'll go to at least $2,000. If you adjust the old high back in 1980 for inflation, gold should be over $2,000 now.
What about silver?
Silver at the old high was $50, silver's at $30 now. Silver can certainly go to $50 again and probably much much higher over the next decade.
It just seems you'd be selling your gold this year with all the hype that's been going on.
There's been some hype about it [but]most of the public, for instance, is selling gold. If you walk around the streets in nearly any American city you'll see signs -- sell us your gold. The public is in there selling their gold, selling gold jewelry, as fast as they can.
I spoke not too long ago to 300 major international money managers from around the world, sophisticated people with a lot of money under management. And the moderator, I didn't know why he said it, but he said, "How many of you have ever owned gold?" Seventy-six percent of those people had never owned gold.
I was stunned, so was the moderator, so was everybody, stunned at how few people actually had ever owned gold, so it's still an under-owned asset, and think about zinc. He didn't say zinc or cotton or some of the other commodities. None of them would have ever said they have ever owned zinc and cotton and other commodities, so the commodity bull market has a long way to go.
How do you own these commodities?
I have an index called the Rogers Commodities Index. I own commodities through those indexes because my lawyer won't let me buy individual commodities anymore because I'm talking to people like you about commodities all the time ... and by the way, many studies have shown that index investing outperforms nearly all active managers anyway year after year, so I'm quite happy just owning indexes.
Let's go to your outlook for 2011. What are three things you are going to be paying attention to in the world economy in the next year?
Everything, everything that's going on: central banks, currencies, commodities, stocks, bonds. I'm short bonds, I'm short U.S. long bonds. I try to pay attention to everything. I cannot be a successful investor unless I pay attention to everything.
You mentioned shorting bonds -- so in terms of commodities, stocks, bonds and cash what's your diversified portfolio?
I'm mainly long commodities. My investments are commodities and currencies right now. I'm short bonds, as I mentioned, I'm short an emerging-market ETF, because emerging markets were so hot in the last couple of years. I own some shares that I've owned for years. I have all my Chinese shares that I've ever owned. I bought my first Chinese shares back in 1999. I don't like to sell things unless there's a good reason.
Are you short any U.S. stocks?
I'm short one ETF, one index ETF.
Are you short any other bonds in any other countries?
No, only the U.S.