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Strategist Nations: 'I Wouldn't Buy Gold with My Worst Enemy's Money'

By Dan Weil   |   Tuesday, 24 Dec 2013 07:05 AM

The Federal Reserve's quantitative easing (QE) program pushed gold to vastly overvalued levels, and now it's going to keep dropping as the Fed tapers its bond buying, says Scott Nations, chief investment officer of NationsShares.

The precious metal hit a three-year low Thursday after the central bank decided to cut its monthly bond buying by $10 billion, putting the total to $75 billion.

Spot gold traded at $1,199 an ounce early Tuesday. And it's likely headed below $1,000 next year, Nations told CNBC.

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"I wouldn't buy gold with my worst enemy's money," he said.

"And why is that? It's because gold got further from home [fair value] because of all of the iterations of quantitative easing, [rather] than anything else out there."

Gold reached a record high of $1,921 in September 2011 and has since dropped 38 percent.

So how should investors play gold?

"I would buy gold puts, because it's going to start getting pretty ugly for gold, and the true believers aren't going to be throwing in the towel until they get a little bit more pain," Nations noted.

Nations is far from the only gold bear at present.

"Investors remain negative toward gold for now, as there is no more uncertainty around the Fed taper," MKS SA Vice President Bernard Sin told Reuters.

"The Fed QE tightening . . . will lead to a gradual rise in interest rates, which will eventually make the cost of carrying gold a lot higher. . . . And that suggests further liquidation."

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