Jim Rogers Says Possible Gold Correction and Is Long Dollar

Posted by Doug Eberhardt on Nov 29, 2011 in Gold | Comments Off

Jim Rogers, author of the book, Hot Commodities, came out today with a statement that gold is “due for a correction” and that he is long the U.S. dollar. This comment comes on the heels of what he said in September; “Gold price correction will last for several months.”

Gold and Silver Correction

I thought it might be appropriate to quote from Rogers book Hot Commodities where he wrote a section called “Warning! There Will Be Setbacks.”

P. 26,27

I cannot promise a stairway to heaven. No bull market in any asset has ever gone straight up; periodic corrections will always occur. In this bull, too, there will be corrections; things will go down. And when they do, the smart investor will buy more. In the last commodities bull, which ran from 1968 to 1982, commodities went up and down slightly for the first three years and then spiked more than 200 percent on the CRB Index, went down a bit, then up a bit–and then plunged 53 percent over the next year. Commodities gained 22 percent on the CRB by 1977, only to lose 15 percent of that gain the following year. After five years of ups and downs in the same range, one might have thought that commodities had stalled. But one would have been very wrong–and would have missed another 104 percent spike in prices before that bull market ended in 1982.

The bottom line, is we are in one of those gold corrections that Rogers warned about. At the same time, we have a dollar bounce seeing the index march towards the 80-85 range. This is a normal pattern whereby when the dollar bounces, gold and silver move in the opposite direction. Gold in the $1,500 range and silver in the $25 range would be a screaming buy and I hope we get there.

Reminder of Why Gold and Silver Will Move Much Higher In the Years To Come

The following links lead you to the big picture in understanding what’s going on in our economy. I wrote about these in an article on January 11, 2011; Money Magazine Joins The 2011 Gold Bubble Crowd – Deja Vu

• Double dip in housing is almost here
• Commercial real estate loan delinquencies are rising with more problems ahead
• Government spending is still what’s propping up GDP
• Banks have more sub-investment grade derivatives than at the height of the financial crisis
• Manufacturing recovery dies in terms of unemployment
• The American Recovery and Reinvestment Act (more stimulus) is only a temporary solution
• U.S. States continue to face large budget gaps
• Despite seasonal job growth, future employment looks dim
• Pension plans are underfunded
• Medicare is gaining 7,000 new 65 year old baby boomers a day

Being that it is an election year in 2012, you will find Obama pulling out all stops to get reelected. You won’t find a Republican candidate, sans Ron Paul or Gary Johnson, who will make a difference in cutting what needs to be cut. Just look at the failure of the Super Committee to make simple cuts to the deficit. They aren’t even addressing the debt! How can Congress be taken seriously when they don’t take the necessary steps to reduce debt? This is a joke…on us.

Race To the Bottom

There is another section of Rogers book warning how China has caused some of the gain in commodities and they will also cause some pain; “When China sneezes, the rest of the world will be reaching for Aspirin.” We may be seeing some of this occur now. Rogers advice is to simply buy the dips. He says that prices should continue to rise through the year 2015 and the Chinese are not about to disappear. It’s where most of us Americans get out stuff from still right? While not all Chinese benefit from being the producers for the world, their people’s overall wealth will continue to increase and they do have access to gold. The students their also know the value of the dollar and mocked it when Timothy Geithner was giving a speech to them when he mentioned a “strong dollar.” We Americans should mock him too..as this strong dollar we are currently experiencing is only at the expense of the weaker Euro. Soon, it will be a race to the bottom.

Euphoria Stage for Gold and Silver

Despite these gold and silver corrections that we are experiencing, even though today we have an uptick in gold and silver somewhat flat, we have not even come close to entering into the “euphoria” stage for gold and silver yet. While the euphoria will be there for those who own gold and silver, it won’t be there for those who haven’t planned ahead and acquired any of the metals. Patience will pay off in acquiring and the prices you get by dollar cost averaging into a position over the next few months will see you being a part of the excitement in the years ahead. Your hardest decision will be, “when to sell.”