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Jim Rogers on Gold

Can Gold Reach $900?

By Lindsay Williams
07 Dec 2005 at 11:14 AM EST


JOHANNESBURG (Business Day) -- Classic Business Day gets multi-billionaire Jim Rogers, former partner of George Soros in the legendary Quantum Fund, on the line about the performance of commodities in 2005, and the outlook for 2006.

LINDSAY WILLIAMS: Jim, can we maybe start with commodities that are most important to South Africa and Africa - the precious metals, and base metals. Even I am surprised by the way the gold price has behaved - I think it’s doubled in the last five years to $510 an ounce, and platinum was recently at 25.5-year highs, with silver also doing extremely well - what do you think the prospects are for this particular complex?



JIM ROGERS: I suggest you read my book where I explained how all this would be happening, and it’s going to get better - you haven’t seen anything yet. Copper needs to correct, some of these things need to correct – but the shortages of raw materials is going to get much worse over the next 10 to 15 years, and we’re going to have an unbelievable bull market. Even I – and I’m bullish – am going to be surprised! There’s been no major oil discovery anywhere in the world in over 35 years - oil fields are depleting. Most metals companies have not been exploring for metals, and certainly not opening many new mines - except for gold that’s continued to expand - but for most other metals people just haven’t done any exploration. Phelps Dodge - which is the second largest copper company in the world - has made a conscious decision not to open any new mines, they’re going to try to expand their old mines. This is going to cause problems down the road....

LINDSAY WILLIAMS: So if we break it down - you’re talking about copper, you’re talking about oil - but if we go back to the precious metals complex are they just going to tag along because of the inflationary consequences, or just tag along with the whole commodity bull market in general?

JIM ROGERS: You mean gold and silver?

LINDSAY WILLIAMS: Yes.

JIM ROGERS: Gold is certainly going to participate, but I think you’re going to make more money in other commodities - you will make more money in sugar or coffee than you will in gold, but I own some gold and some silver - we’re certainly going to make money in all of these things. In previous bull markets of any asset class - everything makes a new all-time high. That means gold has to go to at least $900, and silver has to go much higher if history is any guide to how bull markets have always worked....

LINDSAY WILLIAMS: I remember you speaking to us last time - I think it was maybe it was about nine months ago - you said perhaps the oil price had run a little bit too far, and you proved correct. It did go to $70 a barrel, but it’s back now at around about $60 - is there going to be a second or third wave on this particular commodity?

JIM ROGERS: Sure, oil will be well over $100 before it’s over - if history is any guide this bull market is going to last until around 2018, sometime between 2014 and 2022, and everything is going to go much higher. There has been no major oil discovery anywhere in the world in over 35 years - every oil field you know about is in decline. Somebody has to do something....

LINDSAY WILLIAMS: That’s the supply side of things – on the demand side of things in the past we’ve spoken a lot about China, and we’ve spoken about the U.S. economy as well - is the demand factor still a big one?

JIM ROGERS: Of course. I think most Chinese still don’t have electricity, most Indians still don’t have electricity - they’re going to get electricity even if those countries grow at a slow rate, and they’re certainly not going to rip out their electricity anymore than you’re going to rip out your electricity if things slow down - demand will continue to grow.

LINDSAY WILLIAMS: Is there any problem perhaps with the U.S. dollar when it comes to the dollar price of commodities - we’ve seen the gold, platinum, silver and copper prices and everything else dislocating from the strength of the U.S. dollar - does that mean that we should ignore the dollar’s strength and just buy commodities?

JIM ROGERS: The dollar is fundamentally very flawed, and it’s going to be a serious problem in the next five or 10 years - it’s having a big rally in 2005 for some technical reasons. It was beaten down in 2002, 2003 and 2004 and there’s a special tax incentive for American companies to bring their money back into the US this year - but that incentive ends this year, and so you will see the dollar resume it’s decline, and that is bullish for commodities, but that’s not the main reason commodities will be going up. The main reason is supply and demand are out of whack, but a weak currency like the dollar is going to help commodities.

LINDSAY WILLIAMS: What do you think about the implications for the other asset class - that being equities. We’re seeing the Dow Jones getting very close to 11,000 and everyone getting very enthusiastic. Ben Bernanke is coming in to take over the chairmanship of the U.S. Federal Reserve - what are your predictions for the financial markets?

JIM ROGERS: I’m not optimistic about the U.S. stock market in 2006. The economy will slow down, the market will slow down - the market has been flat for a couple of years now basically, and Ben Bernanke will be a disaster for the Federal Reserve. His solution to everything is to print money - so I’m not optimistic about the dollar, the stock market, the economy in the U.S. next year....