Gold prices have surged to record highs, and many experts say you ain’t seen nothing yet.
Barclays Capital, not known for its extreme views, sees the precious metal possibly hitting $1,500. Investment guru Jim Rogers — who is known for extreme views, and for being right — now says gold will likely breach $2,000.
Gold topped $1,050 amid the dollar’s decline and fears of inflation, as the U.S. racks up massive budget deficits. The government’s debt burden is forecast to reach 56 percent of GDP this fiscal year.
“Having rallied ‘off the charts,’ we are left to resort to projections and extrapolated trend lines to forecast where the move might stop,” Jordan Kotick, Barclays’ head of technical analysis, wrote to clients.
“Channel resistance currently is at $1,370; history suggests a run at $1,500,” he says.
“We believe gold has a significant upside potential into 2010.”
Of course, Rogers has been beating the drum of higher commodity prices, including gold, for years. And, so far, he’s been correct.
“If you go back and adjust . . . for inflation back in 1980, gold should be over $2,000 an ounce. In my view it will get there again sometime in the next decade,” the legendary investor told Bloomberg News.
So how is Rogers playing the move?
“I own gold, and I’m not selling. I don’t particularly like jumping on to buy it at the all-time high. If and when it goes down again, perhaps I’ll buy more.”
Meanwhile, a star hedge fund manager says the Fed will keep printing money, another bullish sign for gold.
The U.S. economy will be weighted down by deficits, increased regulation and limited household spending in the coming years, while investment opportunities will emerge in other parts of the world, says Paolo Pellegrini, who has made a career — and a fortune — betting against market sentiments.
The U.S. Federal Reserve will continue printing money “as instructed by the financial services industry,” which will further erode at investment confidence.
“I have zero confidence in what the Fed is doing,” Pellegrini told Bloomberg.
Pellegrini, formerly of Paulson & Co. hedge funds and now running his own operation, PSQR Management, is betting on oil and also on currencies of countries that produce oil and other commodities.
There's room for such assets to grow, he says.
Oil prices have taken a hit during the recession, especially since job losses in many economies around the world have cut into demand.
Crude prices hit $150 a barrel in July 2008 only to fall to $33 a barrel in December of the same year, according to Reuters data.
Today, oil is trading around $70 a barrel.
Inventories, meanwhile have been climbing, and prices will not shoot up again until economic recovery demands those reserves and fresh drilling can drive prices back up.
Of course, the other big factor is the dollar. If investors sell off the green back in huge amounts, that will drive up oil, as it did in 2008.
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