Is Gold’s 50% Bull Market Fall The Launchpad For $8,800 An Ounce?

Will the author of ‘Hot Commodities’ and the man who spotted the boom in the sector before anybody else, Jim Rogers now start buying gold?

He said earlier this year that he would when the bull market showed a 50 per cent retracement. That is to say the gold price had fallen to halfway between the $287 an ounce it was in 2000 to the $1,923 it reached in 2011.

Simple logic

Mr. Rogers astutely noted that he did not know a commodity market that had not corrected in this way before powering very much higher, and that has now happened. Perhaps he has already been out bargain hunting.

After all that’s how this ex-hedge fund manager made another fortune in the 2000s, ahead of everybody else. He parked his money in commodities and went off for a three-year holiday with his then girlfriend and now wife.

Mr. Rogers bought when nobody else was interested in commodities. And after the ‘flash crash’ of last weekend the financial columns are full of obituaries on gold.

So are we to believe that after more than 5,000 years as a store of value for humanity that gold has finally been replaced by the like of Apple shares? Or has it just become horrendously oversold courtesy of the manipulation of paper derivatives?

In Mr. Rogers’ famous book his chapter on gold concludes that one-day gold will have a spectacular blow-off again as mankind loses control of its printing presses. Are we about to see that day?

1975-6 precedent

From 1975-6 gold underwent a 50 per cent correction of the type Mr. Rogers has been waiting for and it subsequently rose in value by a factor of eight. That would give us a spike to $8,800 an ounce today.

What are the alternatives and how likely do they look? Does Wall Street not look a lot like Chinese stocks did a little over a month ago? The US dollar is far too high, and look what just happened in China where the currency is dollar-linked and so also overvalued.

And yet all the talk is of pushing the dollar higher with Fed interest rate cuts. Everybody knows what that does to stock market and bond markets and we have bubbles in both.

Surely at this point the sane money begins to dump stocks – as Goldman Sachs suggested this week, and moves into precious metals that offer outstanding value at current price levels. Markets do move in cycles and not straight lines.

http://www.arabianmoney.net