Bloomberg News

Gold to Top $1,800 by November Before Drop, FX Concepts Says

October 19, 2011

(Updates with Taylor comments from third paragraph.)

Oct. 19 (Bloomberg) -- Gold may climb to $1,800 an ounce next month before sliding as commodities drop and some investors sell to cover losses in other assets, said John Taylor, founder of FX Concepts LLC, the world’s largest currency hedge fund.

The metal may reach between $1,750 and $1,800 by late November, said Taylor, who in July correctly predicted that bullion would touch $1,900 an ounce by this month. Prices may then slide to between $1,000 and $1,200 by April or May, where it would be a “big buy,” he said. Gold set a record $1,921.15 on Sept. 6 and has outperformed commodities, global equities and Treasuries this year.

November “looks to us like a cyclical high for risk and for us that would be almost a perfect time for gold to have its cycle peak,” Taylor, whose firm manages about $5 billion, said today in an interview in London. “Then it’s going to be weak after that. That sort of fits in with our forecast which is really negative for the economy next year.”

Gold is in the 11th year of a bull market, the longest winning streak since at least 1920 in London, as investors sought to diversify away from equities and some currencies. Bullion held through exchange-traded products totals more than the holdings of all but four central banks, which are adding to reserves for the first time in a generation.

Gold Outperforms

Immediate-delivery gold traded at $1,654.93 by 3:44 p.m. in London and is up 16 percent this year. The Standard & Poor’s GSCI Index of 24 raw materials gained 1.5 percent this year, the MSCI All-Country World Index of equities dropped 9.1 percent and Treasuries returned 7.9 percent, according to a Bank of America Corp. index.

Taylor said on July 20, when bullion was at about $1,600, that prices would reach $1,900 by October. It slipped as much as 20 percent in three weeks after touching an all-time high as some investors sold the metal to cover losses in other markets. Gold’s 11 percent slide last month was the most since October 2008. Commodities slid 12 percent in September, the most in almost three years.

Gold “is really easy to sell, because it’s liquid, so when people are kind of stressed they’re going to sell it,” Taylor said. “It is kind of a commodity, and we’re going into a time when commodities will be under pressure next year. Copper will look bad too, silver will look worse.”

$5 Trillion Gone

About $5 trillion was wiped off the value of global stocks last month and commodities plunged on signs economic growth is slowing. Group of 20 finance ministers and central bankers last week set a summit this weekend as a deadline for the European Union to come up with an expanded crisis-fighting strategy.

Holdings of the metal in ETPs were 2,220 metric tons yesterday, according to data compiled by Bloomberg. Assets reached a record 2,299.8 tons on Aug. 8.

“I think it’s probably a big buy” if gold drops to between $1,000 and $1,200, Taylor said. “There’s nothing to stop it from going up. Monetary systems are grotesquely screwed up, especially in Europe and also in the U.S. There’s going to be an awful lot of confusion going on for the next decade.”

--Editors: Claudia Carpenter, Dan Weeks

To contact the reporters for this story: Nicholas Larkin in London at nlarkin1@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net


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