Tags: gold | banks | government | shutdown

Interest Rate Observer's Grant: Central Bank Folly Will Lift Gold

By Dan Weil   |   Thursday, 03 Oct 2013 08:13 AM

James Grant, editor of Grant's Interest Rate Observer, expects gold prices to rise as a result of the flawed easing policies of central banks around the world.

"Gold is the legacy monetary asset. It was there before they printed paper," he told Yahoo.

"The price is the reciprocal of the world's faith in central bankers. The world ought to have much less faith in central bankers. As that proper distrust grows, the gold price will appreciate. I think gold is cheap at this price."

December gold futures settled at $1,320.70 an ounce Wednesday, up $34.60 from Tuesday.

Grant also likes Russian oil companies, such as Lukoil. He concedes that "corporate governance isn't their strong suit."

But, "the companies are priced as if they're going out of business," Grant said. "They're not. Their balance sheets are OK. There's insider buying. They're hugely cheap [at] 2.5 to 6.5 times earnings. They're also cheap with respect to reserves in the ground."

The companies pay dividends, too, and "nobody likes them," Grant said.

One asset he doesn't favor is art. "People are paying immense prices for contemporary artists who by definition have no staying power," Grant said.

As for gold, the government shutdown is boosting it, experts say. "The market is jittery because of the government shutdown," Tom Power, senior commodities trader at futures brokerage R.J. O'Brien, told Reuters.

"If the economy numbers continue to be weaker than expected, we may see a slide in the dollar, and money in equities flow back into Treasurys and metals for the time being."

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James Grant, editor of Grant's Interest Rate Observer, expects gold prices to rise as a result of the flawed easing policies of central banks around the world.
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2013-13-03
 

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