Are stocks still suspect, and what is the outlook for gold?
*Barron's, by Lawrence C. Strauss & Derek van Eck, April 20, 2009:
"Are you concerned that this recent rally in the stock market could
be a head-fake?
Absolutely. There is clearly a risk of that, and we are very aware that
you need a healthy banking system globally to have strong, sustainable
global growth. There is no doubt in our minds that the banking system
still has holes that need to be filled. The banking sector needs --
depending on which estimate you use -- $200 billion to almost $1
trillion of additional capital. Some of these programs sponsored by the
U.S. Treasury, the FDIC [Federal Deposit Insurance Corp.] and others
have to work. If they don't, you don't have sustainable growth in the
OECD countries, and there would still be risk in the commodity markets.
Moving on, what's your outlook for gold?
Gold is off roughly 10% from its high, which was about $1,000 per ounce
about a year ago. Now, gold is caught in a vise. The U.S. banking
system is still in pretty poor health, and the consumer is probably
overleveraged. So you have a deflationary, deleveraging story, which is
probably acting as an overhang on gold. Offsetting that is quantitative
easing virtually everywhere in the world. So there is free money being
printed in the U.S. and the U.K.
Which is the better scenario for gold?
The upside case for gold is more of an inflationary environment. I
don't think anyone thinks inflation is a problem today, but a growing
number of people think inflation is going to be a problem two to three
years down the road. We are in that camp.
Gold typically trades in long cycles, up or down. Are we still in a
secular up-cycle?
Yes, we think that's the case. Gold is taking a healthy pause right
now; it needs to consolidate. There was a lot of fast money in gold
when it came to the sovereign concerns [a few months ago]. Some of that
fast money is now out of gold, which is a healthy phenomenon. But gold
is increasingly accepted as its own asset class and as a separate
currency. We [see gold hitting] new highs, over the next year or two,
of around $1,500 an ounce."
*This information is solely a highlight of the opinion of a third-party publication and is incomplete. Please subscribe to this publication for the full and timely opinion of the author and call a Monex Account Representative for any additional up-to-date information. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.
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