[T.S.R:16744] Robert Lenzner: Sell Gold, Buy Oil

The price of gold today appears to be managed by speculators, not determined by investors, or end-users with a long-term view 

The price of gold has fallen from a peak of $1425 an ounce to $1342 an ounce– a modest drop of  6%– not yet a real correction of 10% or more.

But, the speculative furor  about gold has quieted down;  as the market's theme has been to focus on stronger economic data in the U.S. and stocks continue their climb,  there is not the same intense  passion to use gold as a refuge. 

Then, too, the story has passed from the gold gurus like  Frank Giustra,  and  the central banks of China, India and Russia, among others,to the hedge fund giants like George Soros and John Paulson, among others,  to mutual fund groups like US Global Resources to pension funds, wealthy families. 

Now what to expect? Gold is still only 0.38% of total global financial assets. And GLD, the popular ETF that owns some $60 billion of gold bullion, traded 19.5 million shares Friday, 50%  greater  volume than the average trading session. 

An excuse for the promotional sharks, both bull and bear,  and stir up the waters. Crazed bloggers are talking $4000-$5000 an ounce in 2011, while technicians  like Stockcharts.com are looking for a step down to $1300, then possibly $1248 and "it can get to $1,076." 

From inner Mongolia, where he's onto some coal deal, my number one gold adviser, Frank Giustra, who has about 30% of his worldly wealth in gold, waxes wise and comfortable.  He emailed yesterday; "It's had a spectacular run on the back of all kinds of concerns which have all been well documented. It is having a good and overdue pullback due to a lack of "crisis dejour." The fact that there has been been no fundamental change in the underlying reasons for golds rise in the first place, has been temporarily lost on goldbugs." 

Meaning; the dollar is still under pressure and gold is on its way as a store of currency reserve around the world. Hold your positions.

From Boston investment manager Jim Joslin, an old and wise friend comes a note of caution; "the price of gold today appears to be managed by speculators, not determined by investors, or end-users with a long-term view." Well, maybe, if you mean the hedge funds will dump and run if a financial crisis spikes gold prices to fantasy prices. 

Every firm on Wall Street has a view on gold; BNP Paribas looks for $1565 by yearend 2011.  Goldman Sachs is targeting $1650 an ounce. Others try to get our attention by flagging $2000 an ounce  this year. 

My own view is that the run from $1050 to $1400 won't be duplicated in 2011. It's going to be slower going, with reversals triggered by higher interest rates in China, by the uncertainty over  US interest rates– which, if they move higher, create  competition for gold. 

That said, my own guess is that copper and oil, both in high demand for building and running the Chinese economy are safer bets to commit money.
 

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Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

 

Nothing in this article is, or should be construed as, investment advice.

 

 

 

 

 

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