Tags: Rogers | gold | correction | 2013

Jim Rogers: Gold Correction Could Drag on into 2013

Wednesday, 19 Dec 2012 12:09 PM

Gold prices have been falling lately as investors ditch the yellow metal and opt for the safe-haven U.S. dollar, a trend that could carry on into 2013, said noted commodities investor Jim Rogers.

Fears the United States may careen over the dreaded fiscal cliff and go into a recession have sparked heavy safe-haven demand for the dollar, a popular asset in times of uncertainty that traditionally moves inversely from gold.

Spurts of optimism have typically seen investors ditch the dollar and chase nicely priced equities over gold since inflationary pressures remain at bay.

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Gold prices, which rose for over a decade, are trading a little over $1,665 an ounce, down from a record of over $1,920 an ounce hit in late 2011.

Now might not be the time to dive back in.

“Just be careful, there’re too many bulls, including me, but I’m very cautious,” Rogers told CNBC.

“Gold is having a correction — it’s been correcting for 15 to 16 months now — which is normal in my view, and it’s possible that [the] correction is going to continue for a while longer.”

Gold bullion experienced its last major correction during the financial crisis of 2008, contracting 32 percent.

“Most things correct 30 percent every year or two, even in big bull markets — 30 percent corrections are normal and yet gold has only done that once in the past 12 years,” he said.

“Gold on any kind of historic market basis is overdue for a nice correction.”

Waning physical demand in India should dampen prices as well despite loose monetary policies in the west that debase paper currencies to stimulate their economies, a recipe for rising gold prices.

“India’s got a big balance of trade deficit — some Indian politicians are starting to blame it on gold,” Rogers added.

“[If they] figure out a way to cut or crimp imports of gold — if something like that happens — that will be a big shock to all those bulls on gold and who knows how low it can go.”

Still, the Federal Reserve has said monetary policy will stay loose, while in Japan, incoming Prime Minister Shinzo Abe has said he wants to see more aggressive monetary easing at the Bank of Japan, which would weaken the yen and boost the yellow metal’s appeal.

Other investors say despite gold’s recent downturn, the future still looks bright.

“Near-term gold sentiment is under pressure, but further out, the view remains positive and in that sense current weakness ought to be considered a good buying opportunity,” Edel Tully, a London-based analyst at UBS, said in a report, according to Bloomberg.

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