Always looking for bargain prices in commodities markets, famed investor Jim Rogers has been patiently awaiting a significant pullback in precious metals prices before adding to his stockpile. But that plan may change for Rogers.
The Fed’s statement released on Wednesday, in which it announced a coordinated 50-basis point cut in dollar swap rates with five other central banks, jolted Rogers into rethinking his buying strategy for precious metals and commodities, according to a GoldSeek interview with the 69-year-old
When GoldSeek Radio host Chris Waltzek asked Rogers whether he’s buying commodities right now, the 69-year-old commodities trader said, “Well, not at the moment, but I’m seriously considering it given what’s happening in the world . . . They [central banks] are going to loosen up even more on money. That’s not good for the world, not good at all, but that’s all they know how to do. So, I’m contemplating, being forced to buy more real assets.”
For weeks, Rogers has been peppered with the same question regarding his plans to buy more gold, and, by proxy, more silver. He’s repeatedly said that he’s been waiting for an additional pullback in the precious metals before adding to his positions and that he remains a staunch long-term bull in gold (NYSEARCA:GLD), silver (NYSEARCA:SLV) and commodities for, what he expects, the remainder of the decade—at least.
In a CNBC interview, two weeks ago, Rogers said, “I’m long commodities and currencies, because if the world gets better, the shortages in commodities will make sure I make money. If the world economy doesn’t get better, I’d rather own commodities because they’re [central banks] going to print money,” adding that he’d become excited if gold reached the $1,200 level.
However, Wednesday’s rate cut within the dollar swaps market showed that the Fed is committed to temporarily backstop Europe’s liquidity freeze in the Eurozone while a more permanent solution to the liquidity (solvency?) crisis there is drafted by the leaders of the EC on Dec. 9. It appears that the Fed and ECB are poised to print more money.
In addition to Wednesday’s pre-market shocker by the Fed, a more recent overture from Chicago Fed governor Charles Evans, who said on Dec. 5, “further monetary stimulus is needed” to steer clear of another U.S. debt trap, has upped the rhetoric for more money printing by the Fed, possibly slated for the Jan. 23-24 FOMC meeting.
In the meantime, the ECB decides whether to lower rates on Thursday, Dec. 8. Another rate cut in addition to ECB’s new chief Mario Draghi may send precious metals soaring once again.
All of these events trouble Rogers, who sounded disappointed that he may not get his wish for lower gold and silver prices. It appears that recent events may have altered his expectations.
So, is Rogers buying gold now?
“I would have said ‘no’ before yesterday; now, as I say, I’m reconsidering,” he stated. “I was hoping we’d have a large correction, a continuing correction. It [gold] has been correcting for three months now, but that’s not much in the context of the 11 years [bull market], so I’m trying to figure out what to do. I might buy more, given what happened yesterday. I’m trying to figure out exactly how extensive this is going to be.”
And for Rogers’ take on the silver price, he repeated his preference for buying silver because of the large discounted price to its all-time high and inflation-adjusted high of approximately $150 per ounce.
“Certainly silver could go to three digits if you adjust it for inflation, you get to U.S. dollars, a $100 per ounce some time during the course of the bull market,” Rogers said of the bull market potential for the price of silver. “Yes, I’m sure that will happen.”
Given a choice between buying only one of the two monetary metals, gold and silver, Rogers said, “If I buy either today, I’d probably buy silver, just because it’s cheaper on an historic basis. They more or less move together, certainly not always. I would probably buy silver, if I decide to buy precious metals.”
Then, the conversation turned to the U.S. economy.
Rogers expects utter calamity during the next economic downturn in America, suggesting that each downturn in the U.S. economy creates an increasingly more difficult job for the Fed to raise growth again due to the swelling drag of accumulated debt created by the central bank in the series of ‘prime the pump’ responses to all previous downturns. See Kondratiev-wave cycles.
“At some time by the end of 2011, 2012 or 2013, we’re overdue for another economic slowdown and that it will be worse than last time because there has been so much staggering amounts of debt created,” Rogers explained.
“You know we had a slowdown in 2002; it was bad; 2008 was worse because the debt was so much higher. You know 2012, 2013, whenever it comes it’s going to be worse still because the debt now is up so much,” he added. “The U.S., when taking into account all the off-balance sheet guarantees such as Fannie Mae’s derivatives positions the debt has more than quadrupled from last time. They cannot do that again. The market’s not going to let them print staggering amounts of money anymore.
“My only point [was] the next time around, when it comes, and it is going to come, anybody that tells you that it’s not going to come, you should not bother with them, but when it comes the next one’s going to be worse than the last one.”
Related: ProShares Ultra Silver (NYSEARCA:AGQ), SPDR Gold Trust (NYSEARCA:GLD), ProShares UltraShort Silver (NYSEARCA:ZSL), iShares Silver Trust (NYSEARCA:SLV), Market Vectors Gold Miners ETF (NYSEARCA:GDX), iShares Gold ETF (NYSEARCA:IAU).
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