Sunday, 13 May 2012 12:07 PM
By Julie Crawshaw
Gluskin Sheff chief economist David Rosenberg says gold will hit $3,000 as global stock markets are repeating the downturns of 2010 and 2011 and it is time to search for safety.
There's a “very good opportunity in gold” as it has corrected and seems to be “off the radar screen right now," Rosenberg tells the Financial Times. Gold traded late Friday at about $1,584.
“Gold and gold mining stocks look to have significant value.”
Over time, Rosenberg says, gold is acting less like a commodity and more like a currency. And, rather than benchmark gold prices against other metals, gold is increasingly benchmarked against the dollar.
“It’s not about being bullish or bearish,” Rosenberg says. “It’s about how you view the world.”
Right now, Rosenberg observes, “central banks are going to keep short-term interest rates in real terms negative as far as the eye can see.”
“That is critical, because one of the most crucial determinants of gold price is real short-term interest rates,” he says. “The longer they stay negative, the longer the gold bull market is going to be.”
Rosenberg also suggests that investors uncomfortable with government bonds consider corporate debt instead.
“We’re probably at an inflection point for corporate earnings, which leaves the stock market perhaps vulnerable,” says Rosenberg. “Corporate bonds now are actually priced for a five percent default rate — right now the default rate is about two percent — so you have a nice cushion.”
“Corporate bonds are a very good place to deploy your cash now, in my opinion.”
The Saudi Gazette reports that gold prices are expected to witness an increase of 10 percent to 17 percent during the coming four months compared to the first quarter of the year.
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