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Where do the ”Barron’s Roundtable” experts see oil and gold in 2012?

*Barron's, by Lauren R. Rublin, January 16, 2012

”. . . what do you think about oil and gold? They are of interest to many investors.

Faber: Oil has further upside potential. Long-term demand is there. Per capita consumption in India and China is low and will increase. Supplies might be rather limited. Oil is around $100 a barrel now. How high it goes depends on how much Mr. Bernanke [Federal Reserve Chairman Ben Bernanke] prints. If there is a disturbance in the Middle East, the sky is the limit.

Cohen: Demand for industrial metals might also be good because of the growth in emerging economies. Brent crude could rise to $120 to $130 in the next two years, partly on higher global demand. Also, most capital spending has been directed at technology, leaving little for investment in the petroleum infrastructure, and for finding new fields.

Hickey: If all economies are in decline, I would be less interested in oil than gold.

Gabelli: Technology wins. We will drill for shale oil, which will make us less dependent on foreign energy sources. But something may happen in Saudi Arabia in the next few years and oil prices will go up. You can’t have an Arab Spring that affects all other countries but Saudi Arabia.

Gross: The price of oil and gas is dependent on real interest rates and the real rate of economic growth. Gold is more of a store of value. The safer bet right now is gold but both look good.

Rogers: It is easier to get your arms around oil than gold in terms of the numbers and demand. Oil is a good investment in the next few years, with optionality to the upside if something extreme happens in the Middle East. Gold is a good diversifier, but not a great way to make money.

Faber: In the past 10 years gold and silver have performed superbly. The gold price overshot on the upside when it reached $1,921 an ounce on Sept. 6. Now it is in a correction phase and could fall another $200.

Hickey: Gold will rally, then have a seasonal selloff. By the end of the year it could be up 15%, as has been typical in this 11-year secular bull market for gold.

How do you feel about gold-mining stocks?

Hickey: Gold stocks have been terrible. They dropped 20% last year, so that makes them a better buy relative to the price of gold. Last year I owned a lot of gold. Now I have more money in gold stocks than in physical gold or the GLD [ SPDR Gold Trust].

Faber: Do you own exploration companies or producers?

Hickey: I own a smaller amount of exploration companies through the GDXJ [ Market Vectors Junior Gold Miners exchange-traded fund] and a larger percentage of producers.

Zulauf: The world economy will experience a brutal slowdown. Deflationary forces are going to strengthen and commodities in general will decline. You can buy oil to hedge a decline in base metals. Gold started a cyclical correction within a secular bull market last summer. The first wave of selling is ending now. Gold has to be bought some time this year, probably in the second half, below $1,600. Then the monetary authorities will load their guns again and print more money, which will make investors buy more gold. The gold market is so tiny that when people want to shift just a small piece of their wealth into gold, the price flies to new highs.

Faber: It is not that the gold price will go up. It is that the value of paper money will go down. Diversification is important, and people should put 15% to 25% of their assets in gold.

Black: A lot of people own gold as a hedge against inflation. I don’t see inflation in the cards in the U.S. Capacity utilization in the manufacturing sector it is only 77%. We own a couple of gold stocks but buy them as we do other stocks. We look for high returns on equity and low P/Es. We own Barrick Gold [ABX], which trades for 7.8 times this year’s expected earnings. Even absent a big upswing in gold prices, it will do well because production is growing.

Let’s switch to your investment picks. Marc, you’re first.

Faber: My preference is asset diversification, as we don’t know how much money governments will print, the size of fiscal deficits and so forth. The biggest uncertainty is what will happen to the Chinese economy. The Chinese probably can continue to muddle through, easing interest rates again to keep things up. But we’re dealing with an economy driven by capital spending, which is driven by credit, which wasn’t the case until 2008.

A lot of the lending isn’t even on the books.

Faber: There is a huge amount of underground lending throughout Asia. Mr. Bernanke can drop his dollar bills on the U.S., but the growth in dollars here can lead to strong economic growth and inflation in other countries. That has happened in the past few years. I am the most bearish person you can imagine on earth, which is why I recommend putting, say, 25% of your money in equities, 25% in precious metals, 25% in cash and bonds and 25% in real estate. These assets won’t go up substantially this year, but they could preserve your wealth.”

*This information is solely an excerpt of a third-party publication and is incomplete. Please subscribe to the referenced publication for the full article. 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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