Don't Argue with Paul Tudor Jones About Gold

Every week a prominent money manger waxes poetic about gold and last week was no exception as Paul Tudor Jones sounds like a converted gold bug in his monthly letter to clients as recounted in this story at Bloomberg.

The time to hold gold is now as faster inflation and increased purchases through exchange-traded funds and by central banks boost demand amid stagnant mine output, Paul Tudor Jones’s Tudor Investment Corp. said.

“I have never been a gold bug,” Jones, whose company manages about $11.6 billion out of Greenwich, Connecticut, told investors in an Oct. 15 letter, a copy of which was obtained by Bloomberg News. “It is just an asset that, like everything else in life, has its time and place. And now is that time.”
...
“As one would expect, rising inflation suggests higher gold prices, especially when the Fed is perceived to be behind the curve,” according to the letter. “Gold appears to be cheap. In our view, gold’s value should increase as its scarcity relative to printed currencies increases.”

Interestingly, as stocks were getting shellacked on Friday and the dollar was surging, the gold price ended the day about where it began - less than two percent down from its all-time nominal high of a couple weeks ago.

This begs the question of whether we'll ever see a three digit price for the yellow metal again.

Comments

[The Geoffster:]

Read John Mauldin's article posted this morning. He states that Russians and Argentinians hold the top two positions in physical dollars. As the dollar continues to deteriorate, these holders will look for a more stable currency. This seems bullish for gold and silver.

Nov 01 09:22 AM

[kohalakid:]

Well, not necessarily....

The Wall Street Journal reported Oct 28 that the Russians canceled a plan to sell 50 tons of gold in London before the end of the year to finance budget shortfalls because the news of the sale had been leaked.
So the Russians, as do most traders, talk their book but may trade the other side. The Russians say the dollar is junk so they can get more dollars when they sell their gold.
Look for them to sell the 50 tons anyway, very quietly, on the London fixes over the next 2 months. A half a ton a day won't affect the fixing.


On Nov 01 09:22 AM The Geoffster wrote:

> Read John Mauldin's article posted this morning. He states that Russians
> and Argentinians hold the top two positions in physical dollars.
> As the dollar continues to deteriorate, these holders will look for
> a more stable currency. This seems bullish for gold and silver.

Nov 01 03:27 PM

[Fibozachi:]

Have appreciated your work for a long time Tim; thank you for sharing them with us all.

The legendary PTJ proclaims that “As one would expect, rising inflation suggests higher gold prices..."

And you declare that, "This begs the question of whether we'll ever see a three digit price for the yellow metal again."

PTJ's premise is plainly valid during periods of inflation, which we are most certainly not observing right now and will not be observing anytime before Q3 2011 at the very, very earliest. Deflation is the clear name of the game. With the $USD appearing to have bottomed last week at the possible end of Primary wave 2 (circle), the $CRB Index, Gold and related key issues such as Freeport-McMoRan (FCX) appear to be developing further signs of distributive pressure. Before going gaga for gold, please evaluate the technical profile of its price action against the other G-7 currencies as well as that of the @GC continuous futures contract; might be surprised by what you find.

www.zerohedge.com/arti...

Nov 02 03:39 AM

[Zmartmoney:]

"Deflation is the clear name of the game. With the $USD appearing to have bottomed last week at the possible end of Primary wave 2..."
The dollar has bottomed? Hmmmm.... I don't think so. The dollar is going to have 20 bottoms. This is one more of them, on the way to plenty more. The gasping gyrations of the dollar are going to twitch the equity markets like a marionette for the next year or so, until there is some longer term stability to it...like a steady 2-3%/year loss in value. That would be stability according to the geniuses in DC. Gold will follow that continual bouncing, with an upward trend that doesn't really stop for a long time.

Nov 02 09:51 AM

[The Dark Years:]

I think that in a turbulent world rational people search for anything that offers a sense of stability. Gold has always had a value and will in the future. The only real question is what will the value be. Gold is unlike any other asset in that over the longer term it will always be worth something in exchange for currency (and other mediums of exchange), or barter for the necessities of life. It seems to me reasonable that we all would be wise to keep some physical gold in our safety deposit box as a hedge against an uncertain future. Prognosticators, pundits, news letter promoters, futurists, hedge fund managers, etc., will argue, forecast, contemplate, suggest, evaluate, promote, and endlessly address the question about the direction of gold prices. Some will be correct, some sort of in the grove, and some just wrong. If the world we know today were to end, or be drastically changed gold would still have some value. I personally will continue to own physical gold, and hold some small positions in gold mines as a hedge against an uncertain future because I know at the least physical gold will have some type of value.

Nov 02 12:34 PM

[Tears of th...:]

Gee, gold just hit $1095 and Paul Jones has just worked out gold is a good buy? Maybe he will work out silver is a good buy when it hits $50. Better late than never I suppose. Welcome to the party Paul !

Nov 04 08:04 AM