May 8 2012, 08:21 AM
Gold bugs are known as some of the most passionate investors, so not even high-level slams from the Oracle of Omaha and the founder of Microsoft [MSFT 30.745 -0.235 (-0.76%) ] can cool their fire.
"Absolutely I would take the other side of that trade," says Michael Pento, founder of Pento Portfolio Strategies in Holmdel, N.J. "The stock market has gone nowhere in nominal terms in 12 years. It makes sense as a default under the current conditions of negative real interest rates to own something that keeps you afloat, that preserves your purchasing power."
Pento is the former senior economist at Euro Pacific Capital, the firm run by noted gold enthusiast Peter Schiff. Pento has nailed the trajectory of gold's price for the past three years running.
Key PointsBuffett and Gates dislike gold because it is too hard to value.
Gold bugs say the investment is a critical safe haven.
Primarily because of the Federal Reserve's weak-dollar policies, Pento expects gold to continue to hold its place as an inflation hedge, as well as a safe-haven asset to buffer against global debt contagion.
For 2012, he thinks gold should be able to hit $1,900 an ounce.
"I would ask Mr. Buffett if he could own a lone share of a representative of the S&P 500, or would he rather have the equivalent of an ounce of gold?" Pento says. "Which investment has done better over the last dozen years? The answer is clear: Gold."
Buffett and Gates primarily don't like gold because of its lack of intrinsic value. It's not the same as holding shares in a company that has a clear revenue stream and business model, which in turn make it comparatively easy to value. (Buffett's right-hand man at Berkshire Hathaway [BRK.B 82.29 1.35 (+1.67%) ], Charlie Munger, has been less diplomatic, suggesting in an interview Thursday that no "civilized person" should own gold.)Rather than being cowed by Buffett's legend as a buy-and-hold investor, some gold advocates instead consider him out of touch with present-day conditions.
"His track record since 2008 has not been very good," says Kathy Boyle, president of Chapin Hill Advisors in New York. "He might be the Oracle of Omaha for the long-term, but short-term since 2008 his trades have not been that great."
Boyle owns gold through the iShares Gold Trust [IAU 15.9501 -0.0499 (-0.31%) ], an exchange-traded fund that tracks the daily prices of bullion.
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Current DateTime: 12:32:10 07 May 2012
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Who Has the Most Gold?Buffett: Right Idea, Wrong PlanMunger: Gold Not 'Civilized'Gates: Too Hard to Value
"Most of the typical advisers out there and money managers don't look at gold as an investment — they don't look at it as a tradeable asset in their portfolio," she says. "There's going to be a flight to quality and a flight to safety. The dollar will go up, gold will go up and Treasurys will go up."
The safe-haven theme is a popular one, boosted by the notion that Europe's sovereign debt crisis is setting off a national recession that ultimately will spill to the U.S. shores.
Capital Economics in London has established a $2,200 per ounce price target by the end of the year for gold, though the firm thinks investing in the metal will not be profitable in 2013, when the price slips to $2,000
"Gold is still likely to benefit from safe haven demand and the continuation of ultra-loose monetary policy, including in the US," Julian Jessop, Capital's chief global economist, said in a note. "We suspect that gold would still do better than the dollar in a scenario where the issue is not just sovereign defaults but the very survival of the euro, and that in this scenario it would revert to a negative correlation with equities."
Jessop said a mass break-up of the European Union could send gold as high as $5,000, while a scenario in which Europe stays united and the global economy recovers could kick gold down to $1,000. However, he sees neither extreme scenario as likely.
To be sure, the sentiments of Buffett and Gates have support in the markets.
The agreement comes primarily from those who believe that the US economy can survive and grow independent of Europe's problems, allowing stocks to keep pushing higher and negating the need for the rainy-day sentiment behind gold investing.
"Businesses have dramatically improved their balance sheets, there's a horde of cash out there and companies are slowly starting to deploy some of that cash," says Chip Cobb, senior vice president at Bryn Mawr Trust in Bryn Mawr, Pa. "There's a far better place in equities than in gold or fixed income."
Even a breakdown in Europe might not drive gold higher, as an economic slowdown would not produce inflation, argues Gary Clark, commodities strategist with Roubini Global Economics in London.
Clark says his firm — and its famed namesake, "Dr. Doom" Nouriel Roubini — remains neutral on gold with a near-term price target of $1,700 an ounce.
"Fundamentally, we're in a disinflationary environment for the moment. We see inflation decelerating for the rest of the year in many developed markets," Clark says. "On top of that I would say with the votes against austerity for Greece and France, that provides upside for the U.S. dollar. These are all downside risks for gold prices ahead.
Hedge fund manager Dennis Gartman, who authors the widely followed Gartman Letter, says he's a "tad skeptical" about gold — which he owns in euros — but understands its allure.
"One should own a bit of gold but one shouldn't be enamored of gold. It's nothing more than a hedge against Armageddon," he says. "The best one can say is the (chart) trend seems to be in very broad terms from the lower left to upper right. That's the best one can say, and anything more than that will make you look foolish."
© 2012 CNBC.com
http://www.cnbc.com/id/47324444
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Gold has indeed made Dennis Gartman looked very very FOOL-ish in the past.
Not once, or twice but many many times!
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Taking Virginia-based economist and publisher of the Gartman Letter, Dennis Gartman, for example. His track record for forecasting gold prices is so bad that he’s become known as the latest contrary indicator—a ‘professional’ punter, if you will.
Moreover, it’s been suggested that the reason for Gartman’s subscription base is to get fast-track knowledge of Gartman’s trade so that a trader can take the other side.
Just last week, Gartman told Bloomberg News, “we are out of gold” as of Monday (Dec. 12) and “the beginnings of a real bear market, and the death of a bull.”
Sounds dreadful, doesn’t it? So what should gold holders do? Well, let’s see how the advice of the gold market’s Lord Haw-Haw panned out for investors during previous corrective phases—which, by the way, are those very times when buying gold makes more sense in a secular bull market.
“I feared the whole financial system was coming to a halt, and you need a little gold in that case,” Gartman told Bloomberg News on Nov. 3, 2008. “I doubt it will anymore. But it sure felt like it a month ago. There’s no value in gold now.” (See chart, below.)
Three weeks later, on Nov. 25, Gartman didn’t change his mind; he got more bearish when he should have been a raving bull!
“We are short of gold,” he said in a Bloomberg interview. “We shall always sell rallies such as these that retrace as classically as this market has.”
As the market continued to rally, Gartman became ever more aloof, stating on November 16, 2009 that there was, indeed, “a gold bubble” and anyone thinking otherwise is “naive.”
Apparently, ‘Mr. Gold’ James Sinclair of JSMineset hasn’t been a long-term subscriber to the Gartman Letter. Eight weeks earlier, Sinclair saw gold for what it is: a hedge against currency devaluations.
“The carry trade has dropped the dollar as a currency of choice,” Sinclair told Bloomberg Radio in a Oct. 7, 2009. “Gold is competition to currencies,” and added that he expects gold to reach $1,650 per ounce by the first quarter of 2011. Sinclair was off by five months, as gold soared during the summer of 2011, reaching his $1,650 price target in August.
Back to Gartman:
Somewhere between the dates Nov. 16, 2009 and May 18, 2010, Gartman became to think, maybe, it was he who was naïve about the gold market, jumped back into the “bubble” at some point during the six-month period, then proclaimed to Reuters on May, 18, 2010, “We want out and are heading for the sidelines.”
Now Gartman tells us gold is done. Finished. The Fed is done bailing out banks on both sides of the Atlantic and a deflationary collapse is coming.
Apparently, others, too, have noticed Gartman’s poor record of calling bull market tops. Didn’t Marc Faber make reference to these misguided souls in his interview with Financial Sense Newshour? See BER article, Marc Faber Fears Gold Confiscation.
From zerohedge.com:
“In August 2011, Gartman said that gold was the biggest bubble of our lifetime. Inconsistently, only last week, Gartman said on CNBC that he is ‘long gold’ and has been for ‘six or seven months’,” zerohedge’s ‘Tyler Durden’ wrote.
“Gartman’s short term calls on gold and silver have been wrong more often than not in recent years. He tends to turn bearish after gold has already experienced a correction and is close to bottoming.
“Those wishing to diversify and add gold to their portfolio will use his call as a contrarian signal that we may be getting close to a low in this most recent sell off. Our advice is to ignore gurus, price predictions and noise – up and down – and focus on the real fundamentals driving the gold market.”
Read more: http://www.beaconequity.com/gold-price-lor.../#ixzz1uEVDbkJJ
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