American commodities guru Jim Rogers is on something of a roll.
The 70-year old retired hedge fund manager, who co-founded the Quantum Fund with George Soros, has made a series of accurate market predictions, which have increased his standing with investors.
So anyone holding gold might be worried to hear that Rogers thinks the yellow metal, which is already in a bear market, is set to fall another 25%.
However, don’t panic: Rogers isn’t selling – he thinks gold’s best days still lie ahead of it.
Rogers first came to mainstream attention when he correctly predicted the bull market for commodity prices at the start of the century. As that prediction turned to fact, it eventually became a pretty crowded trade, but Rogers marked himself out again when he turned bearish on gold around January 2012.
At the time, gold was riding high at around $1,600 an ounce, but Rogers predicted it would drop to $1,200-$1,300. That’s more or less exactly what happened.
Now Rogers thinks that gold will fall further – to $900 per ounce. As he explains in a recent Financial Times interview, his reasoning for this prediction is very simple: “Gold has gone up 12 years in a row, which is terribly unusual for any asset, so it would be an anomaly if there was not a correction.”
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Rogers believes the correction should be around 50% of the peak (which was $1,950 in September 2011), which is where he gets his $900 figure from.
Of course, believing something will happen and knowing when it’s going to happen, are two separate things. Rogers candidly admits that he’s “terrible at market timing”.
So if you agree with Rogers, how should you play it? In the longer run, Rogers reckons gold will bottom out. “I fully expect the bull market to end in a bubble some day, and some day is not here yet,” he tells Business Insider.
So he’s “not selling gold at the moment”, he tells the FT. Indeed, “if it falls or if it gets down [to $900], then I hope I will be smart enough to buy more.”
Until that happens Rogers is sticking his money in agriculture. “I think there is more money to be made in agriculture… The world is facing a serious demographic and production problem. If something doesn’t change then we won’t have food at any price.”
It’s a drum he’s been banging for a while now but he thinks that recent price drops have created a buying opportunity. “I don’t think we’ve had the final bottom in gold but we must be nearing it in sugar. Sugar is down 75% from its all-time high – there’s not much in the world that is down 75%.”
It’s a view that we share here in MoneyWeek. Indeed in this week’s New World I investigated the best ways for readers to invest in Latin American agriculture.