Gold is about to have its first down year in over a decade.
At least that’s what legendary investor and billionaire Jim Rogers suggests. Rogers is considered one of the best commodity investors in the world. He was buying gold before 1999 – when prices were below $300 an ounce. Today, gold prices are over $1,600 an ounce.
As he told me this week, he thinks it’s due for a break. So is he selling here?
Before I get to his answer, let’s take the “long view” on gold. As you can see from the chart below, gold prices have surged since 2002. In fact, gold prices are up for 11 straight years, outperforming the S&P 500 by nearly 500%.
To Rogers’ credit, he has suggested buying gold almost every year since 2002.
He was super-bullish on the yellow metal following the 2008-2009 credit crisis. That’s when the Federal Reserve pushed short-term interest rates to zero – printing trillions of dollars to support the U.S. economy. And it was a fantastic entry point for new investors.
But Rogers is not buying gold right now. That’s what he said when I interviewed him on this week’s edition of the S&A Investor Radio.
“It’s extremely unusual for any asset in history to move higher for 11 straight years,” he told me. “That’s why I expect the recent correction in gold to continue.”
He’s not selling any of his gold. And he’s not shorting it, either.
It would take a “gigantic new gold supply” or all the world’s central banks deciding to dump gold before he’d short. That’s because Roger’s believes the big gold bull market has “years to go.”
Still, gold could drop as far as $1,100 an ounce, he said. “I would buy gold if prices fall to $1,100 or $1,200 an ounce. A pullback of this magnitude is normal.”
To put his words in perspective, if gold prices fall to $1,100 an ounce, that would be a 42% decline from their August 2011 peak. That’s much more than your average correction. And it would crush gold stocks.
(That puts Rogers at odds with my fellow Growth Stock Wire writer Jeff Clark. Jeff is bullish on cheap gold stocks here… though he also concedes gold is due for a break.)
While Rogers has an incredible track record when it comes to gold, I don’t see prices pulling back to $1,100 an ounce. However, after 11 straight years of outperformance, it wouldn’t surprise me if gold prices retreat at least another 10% from current levels. That would put the price at roughly $1,400 an ounce… or where gold was trading in early 2011.
Either way, it would spell the first down year for gold in a long time.
P.S. Every week, I interview some of Wall Street’s greatest investors on S&A Investor Radio. The show is one of the most widely listen-to financial podcasts on iTunes. You can sign up and listen to past episodes – including my conversation with Jim Rogers – free here.