GOLD PRICE NEWS – The gold price began the week lower, dropping $10 to $1,122 in spite of a slightly weaker U.S. dollar and encouraging comments from legendary investor Jim Rogers. Although the gold price initially rose toward $1,135 this morning, the price of gold quickly reversed course and fell as much as $12 to $1,120 per ounce before recovering slightly this afternoon. While it appeared last week that the gold price may have been ready to challenge its 2010 closing high of $1,151.71 – reached on January 11 – it was once again unable to mount an attack.
Despite weakness in the gold price, the yellow metal received another endorsement from legendary investor and long-time gold bull Jim Rogers. Rogers – who has recently become known for his verbal jousting in December 2009 with NYU Professor Nouriel Roubini, in which Rogers dismissed the idea of a “gold bubble” at current levels – provided his latest thoughts on the price of gold in an interview on Bloomberg Television. When asked again about his wager with Roubini that the gold price will reach at least $2,000 in the next decade, Rogers responded that he will let the market play out, and that “I happen to own gold expecting it to go that high.”
Mr. Rogers – who is perhaps best known though for founding the Quantum Fund with George Soros in the early 1970s – also provided his view of the ongoing budget deficit and sovereign debt concerns in Greece. As an outspoken champion of the benefits of the free market and market-based solutions, it was not in the least bit surprising to hear Rogers state that he believes Greece should be allowed to go bankrupt. He went on to explain that this “would be good for the euro. It would be good for Greece. It would be good for everybody. If Greece went bankrupt then everybody would say, boy, the euro is serious, is going to be a sound currency and the euro would go straight up. It’s not gonna happen that way, but that’s what should happen.”
While many uncertainties remain concerning the timing and structure of a potential bailout of Greece, it appears that the sovereign debt concerns across Europe are contributing to a decline in the correlations between the gold price, euro, and U.S. dollar. This is perhaps most evident by the fact that the price of gold just last week reached a new all-time high versus the euro, while the U.S. Dollar Index has stayed above the closely-watched 80 level.
If a bailout of Greece does materialize – as Rogers and many other investors expect to occur – such a process would undoubtedly involve significant amounts of fiat money creation. Accordingly, as Rogers also discussed in his latest interview, because “governments are printing so much money” to aid the global economy, he is choosing to remain in commodities such as gold, silver, and copper, among others – an investment strategy that has served him well since 1999.
