Whale Watch: Two Market Heavyweights Are Buying Gold?
If you had any questions surrounding the risks of being a gold bug, they should now be answered.
As anyone long the gold market is painfully aware, the yellow metal took another steep dive last week. In fact, the once-loved precious metal plunged $74 an ounce last Thursday. The drop puts gold at its lowest price point since September 2010.
And so far this week, things aren’t looking much better…
The metal dove another $35 this morning. That puts gold down 26% on the year and the second worst performing commodity year-to-date. The only commodity that has performed worse is silver- down 37% year-to-date.
But don’t tell that to Jim Rogers or Marc Faber…
Both of these legendary investors have stated publically over the past few days that they’re buying gold.
As you may know, Mr. Rogers is one the greatest commodity investors of all time. He co-founded one the first international investment funds with George Soros in the early 1970s- the Quantum Fund.
On the other hand, Mr. Faber is famous for his doom-and-gloom views on global markets. He’s not afraid to expound wild market predictions and go against the crowd when it comes to investing.
So what do these gentlemen see in gold- the commodity that’s effectively crashing right now?
According to a recent Bloomberg interview, Mr. Faber is buying gold simply due to the fact that metal is deeply out of favor with investors. His contrarian nature tells him crowd behavior is usually wrong and the best time to buy is when sentiment is the worst.
He went to say that he doesn’t believe Mr. Bernanke’s tapering statement last week. If the US economy isn’t fully recovered by mid-2014, Mr. Faber believes the Fed will be forced to continue quantitative easing- a bullish scenario for gold.
And apparently Mr. Rogers is thinking along the same lines…
According to a recent interview with Hard Assets Investor, the legendary investor says the long-term bull run in the yellow metal is far from over. He went on to say that he’s been expecting a hefty gold correction for quite some time. And now that it’s here, he plans on taking full advantage of it.
As a matter of fact, Mr. Rogers started buying the yellow metal a few days ago.
As promising as this may sound for gold, you need to understand something…
Neither Mr. Rogers nor Mr. Faber is calling a bottom in gold at current prices.
Instead, they said they’re buying and will continue to do so at lower prices. And rest assured, these gentlemen have very deep pockets. In other words, their portfolios can withstand a large drawdown if the metal continues lower.
And even more importantly, both men have a long investment time horizon. They’re willing to wait as long as it takes for this trade to become profitable.
Bottom line…
It’s hard to argue with successful investors like Mr. Faber and Mr. Rogers. Their long track records of success speak for themselves.
But given the technical damage to gold over the past few months, I wouldn’t be in a hurry to jump back into this market. Yes, prices will eventually rebound at some point, but the bottoming out process will take time.
In other words, don’t worry about missing out on “cheap” gold…
Stay tuned to Commodity Trading Research for continued analysis and insight on gold and other important commodities.
Until Next Time,
Justin Bennett
Category: Gold, Precious Metals
