9.3
8.064 reviews
English
EN
Commodities such as gold and silver are preferable to stocks or real estate in these turmoilous times, American investor Jim Rogers recently said in an interview. Rogers is best known for the investment fund Quantum Fund that he set up with George Soros. The investor bases his choice of raw materials on factors such as inflation and uncertainty. He is also very critical of the central bank and politicians. How does Rogers view the current circumstances and why is the investor betting on gold and silver?
Rogers has seen his country do well lately. Economic growth in the United States is much higher than in Europe and the exchange rate of the dollar rose sharply due to the decisive action of the FED, the American central bank. The Fed raised interest rates much earlier than the European Central Bank. Before inflation rose, central banks pursued a very loose monetary policy and, according to Rogers, that policy has also ensured that strong growth figures are now being presented. In the last six months of 2022 and the first half of 2023, the US economy grew by 2.9%.
Economic growth is also due to increased government spending. The budget deficit in America in the year of 2023 will be 1700 billion. According to Rogers, the upcoming elections also play a role in this; Biden will try to create a positive economic outlook in order to win over voters. "Throughout history, you often see stock markets do well in the year before the election," Rogers said.
Although the U.S. economy is doing well now, according to Rogers, it is possible that this will turn around in the near future. "We are now in the longest time without an economic recession in American history. That does not mean that we are now on the verge of a crisis, but the recession will come at some point. I expect more signs of a recession to appear in the near future," the investor said.
According to Rogers, rising inflation will be one of those signs. In doing so, he echoes the ideas of economist Milton Friedman, who argued that inflation is always a monetary phenomenon. Prices of products may change due to differences in supply and demand, but if prices increase across the board, it is due to monetary factors. In recent years, central bank balance sheets have grown significantly in size. According to some economists, there will eventually come a time when that extra money supply causes problems. Rogers expects higher inflation in the coming years due to the increased money supply.
The amount of base money. (Source: FRED)
In the interview, Rogers also expresses distrust of central banks. Central banks can influence markets not only through policy rates, but also by responding to market expectations with certain statements, so-called open-mouth operations. For example, then-ECB President Mario Draghi calmed the financial markets by whatever-it-takesruling at the time of the euro crisis. But according to Rogers, since its founding in 1913, the Fed has often missed the mark with those open-mouth operations. That is why the well-known investor is very critical of the credibility of central banks.
If inflation does indeed remain high in the coming years, this would be catastrophic for bond markets, according to Rogers. Bonds pay a certain percentage of a bond's face value as interest each year. 'But if inflation is higher than bond yields, then you actually lose money every year. As a result, interest rates in the market will rebound, while bond prices will go down. In that sense, the bond market could be a bubble," Rogers posits.
In a world with high inflation, higher interest rates and lower economic growth, Rogers is not betting on stocks or real estate, but on Commodities like gold and silver: 'In a world where inflation is going up, you want to own the things that are also rising in price. Bonds almost never do this in such a case, but real estate and shares also suffer from higher interest rates. On the other hand, the prices of silver, but also of rice, for example, rise in periods of high inflation.
The choice for Rogers would now fall on silver rather than gold. That's because gold is now the all-time-high while silver has sold for much higher prices than its current value. "I think the Gold price will reach much higher points, but I think that the Silver price has more room to rise in the short term. Silver is down 60 percent from the all-time-high, gold is just below the all-time-high', says Rogers.
The Silver price (above) is still a long way from the all-time-high, the Gold price (below) is not far from the highest point.
Rogers also says he is looking at currencies that could take over the dollar's role as the world's reserve currency. According to the investor, such a currency should be neutral. The dollar, on the other hand, is increasingly being used as a weapon, now that Russian assets have been frozen following the invasion of Ukraine. As a result, even U.S. allies are looking for alternatives. Still, Rogers doesn't know which currency can take the fight to the dollar. He also expressed doubts about the effectiveness of the sanctions. These sanctions are mainly a good way for politicians to score points with their supporters, but can be circumvented by the target of the sanctions.
The interview with Jim Rogers shows that precious metals are an attractive investment now that we live in troubled times. Also different Central banks are buying more gold following the outbreak of the war in Ukraine and the subsequent sanctions. The Dutch Central Bank is not currently one of the buying parties, but has traditionally had a large stock of gold and has indicated that it has to hold on to to the precious metal. Former CEO of asset manager Robeco Jaap van Duin also gave in a podcast with Holland Gold that gold is a wise investment. In the coming period, we will see whether silver is indeed catching up with Rogers and whether gold is indeed a new all-time-high Drop.
Do you want toBuying gold bars or Buy Gold Coins ? We are happy to help you with your order.
