The price of gold peaked at just over $1,900 per ounce in the fall of 2011. And it was right around that time that commodities guru Jim Rogers began warning investors that the yellow metal could hit a low of $1,200 before the sell-off was over.
He was right. Gold prices entered a bear market (down 20% from its high) in April. And on June 27, they touched $1,200.
In a phone interview this week, Rogers explained to us how he arrived at the $1,200 figure. He also offers his outlook for gold as it continues its complicated bottoming process. Business Insider: Two years ago, you told us you could see gold going to $1,200. How did you arrive at that level?
Jim Rogers: I’m sure it was all based on intuition from Business Insider, but gold had been up at that point 11 – 12 years in a row which is an anomaly.
I don’t know any asset that’s gone up 12 years without a down year, and gold needed and deserved a correction. And, if it’s going to happen where would it go? $1,200 was between 35% – 40% and 35% – 40% reactions are commonplace, so that was the first number. I wish I could tell you I had a formula.
I’m not sure we’ve found the final bottom yet, it would make a lot of sense for gold having had 12 years up, to have at least a longer consolidation, a longer correction, maybe a few days, a few weeks, or a year or two. Why not 2014, 2015? My view is that gold is in the process of making a complicated bottom which could take a while. So I’m not buying gold. I haven’t sold any gold or silver, but I’m not buying any. I’m watching and expecting a new low, which might be lower.
BI: Were there other things you were watching that made you think gold prices would fall? Emerging market demand or perhaps the Fed?
JR: There were lots and lots of mystics who were convinced that gold was holy. That gold could not go down, that gold had to go up. And that’s the reason I think gold hasn’t made it’s final bottom yet. It’s because there are still lots and lots of mystics, people who tell me gold cannot go to $1,200. I say open your computer you’ll see it is $1,200. Don’t tell me it can’t happen.
Many people think this can’t be happening or it’s being manipulated and there’s all sorts of excuses for what’s going on. You know when you have people that are faithful, or true believers, you usually don’t hit a true bottom until most of those people get washed out. I suspect that is still to come. I don’t think many of the true believers have sold their gold yet.
BI: Do you have any guesses for how long it would take to make a bottom?
JR: I wish I was that smart. I don’t really know it could happen before 2014 or 2015. But the bull market’s not over. Gold is going to eventually make new highs. It seems that there may be another. It’s because it had these 12 years without going down, I don’t know anything in investment history that has gone up 12 years without a declining year. There may be something I just don’t know of it.
BI: What drove gold prices higher for 12 years?
For the rest of this interview, click here: http://www.businessinsider.com/jim-rogers-gold-complicated-bottoming-900-1200-2013-7