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Market Expert: “$1,200 gold not out of the question.”

Today's Financial News - Posted April 26, 2008

by Krista Das

Baltimore — (TFN): The state of the U.S. economy has been a source of much controversy. Are we in a recession? Could we actually be slipping into a depression? Just how bad are things going to get and when are the mass layoffs, the continued devaluation of the dollar, and poor stock performance going to end?

My guest today is someone who has avoided the Wall Street herd-mentality for years, buying housing before the 2004 rise and shorting sub-prime and big housing names before the 2007 fall: Ian Cooper is the editor of Pure Energy Trader and SC Trading Pit.

Many experts won’t say that we’re in a recession because technically, we have not had two consecutive quarters of negative growth. What’s your take?

Ian Cooper: Any one that tells you we’re not in a recession shouldn’t be giving investment advice.

In the last recession we had one quarter of negative GDP growth. This quarter we won’t have one. Greenspan just admitted we’re in one after telling us there’s a 50% chance of one. Warren Buffett thinks we’re in one. The CEO of Caterpillar thinks we’re in one, as does Jamie Dimon.

Listen, it’s tough to discount a recession when consumers are shrinking, production is easing, record numbers of Americans are receiving food stamps, when the average number of American filing for unemployment hits a two-year high, when construction falls for the fifth month, when manufacturing drops, when consumer spending is flat when inflation is removed, and when payrolls put in a third month of declines. Even the Chicago Fed National Activity Index sank, falling to -1.04. We’re knee-deep in recession, and have been for months. I don’t care what the talking heads would have Americans believe.

image of Krista Das

Krista Das: Do you think the fed is finished cutting interest rates?

IC: Our reactive Fed? No. Some big whig has gas and the Fed is there to bail them out. But with the fiscal stimulus set to mail in May, coupled with economic contraction, we’ll see cuts, but not of the caliber we’ve seen.

KD: It’s difficult to find a place to invest your money these days. If stock performance is going to continue this downward spiral, where should we turn?

IC: With the Fed expected to cut rates again, we’ll have a weaker dollar, which will support higher priced gold. Plus, we’re likely to see a steady migration toward the safe havens of gold, give a recession that Greenspan just admitted to.
Image of Ian Cooper

KD: What makes investing in gold and mining stocks so profitable?

IC: It’ll take more than news that the International Monetary Fund plans to sell gold to bring down the price of gold. Sure, the IMF wants to sell 12% of its gold reserve to raise about $6 billion, and help make up for a $140 million budget shortfall.

But demand for gold is strong, and it’s not as if the IMF would dump all that gold supply on the market at once. It’d be gradual.

With tight supply and heavy demand, jewelers and investors alike will be lined up to take it off IMF hands. Gold mine production is failing to keep up with demand. It’s all part of the reason gold prices have quadrupled in seven years.

Consider this if you’re hesitant buying gold. Global gold production fell to 10-year lows in 2007. We’re likely to see more declines this year. All the while, petrodollars are buying up gold. Middle East demand for gold is up 30%, for example.

Take that into consideration, and buy more gold here. In my opinion, $1,000 to $1,200 gold isn’t out of the question.

KD: Ian, good information. Thanks for joining us.

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Posted by Krista Das · Filed Under Gold and Resources 

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