Tuesday, March 10, 2009
It's not clear which is more intriguing in this Bloomberg interview - Schroders product manager Christopher Wyke's outlook for gold or the shrill tone of Bloomberg's Haslinda Amin.
So as not to be distracted by Ms. Amin, a careful read of the transcript below is highly recommended since Mr. Wyke's assessment seems to be spot on.
It's a pretty simple formula - a late-2008 - early-2009 price revision as investors re-jiggered their portfolios and then, sometime later this year, the main act begins anew when the fear of inflation returns (i.e., after "the chain catches the sprocket" and all the newly printed money begins to work its magic in the global economy) .
Amin: Hey, it seems like most people are gold bulls right now. Isn't that an indication we're encroaching a gold bubble or perhaps already in one and that's waiting to burst.Haslinda didn't seem very happy about any of those replies.
Wyke: No, I think you saw a big revision in the gold price last year and gold is certainly below its high of over $1,000 last year and we think that gold has certainly got a long way to go.
Amin: You know what? I mean, don't investors play gold when they're concerned about inflation. Inflation hasn't been a worry right now. Is gold really a safe bet? The way to go?
Wyke: I think people have been investing in gold as a safe haven, as an alternative to stocks. But what's really impressive is that the gold price is up by about 25 percent in the last four months at a time when the dollar's been strong and no one's been worried about inflation. I think, when that turns around, when the inflation concerns arise again, and if the dollar is to fall again, then gold could move very sharply ahead.
Amin: OK, how sharply? How high can gold go? Gold prices quadrupled in the last decade. Jim Rogers told us yesterday it would hit about a thousand bucks an ounce (inaudible) of Commodity Warren says a thousand two this year. What's your own prediction? Where will gold go by the end of this year?
Wyke: think it depends very much on what the dollar does, but, to get to its previous inflation adjusted high, the price it reached in 1980, to get to that on an inflation adjusted basis, it has to get to $1,800. So, I think if we saw a fall in the dollar, and then towards the end of the year people started getting concerned about inflation, then a price of $2,000 an ounce is certainly possible.