BLBG: Gold to Top $1,350, Oil at $100 in 6 Months, Investor Kang Says
By Kim Kyoungwha
Nov. 5 (Bloomberg) -- Gold will climb to $1,350 an ounce and oil will top $100 a barrel in the next six months, driven by a “herd mentality” fueling an investment boom, said Richard C. Kang, chief investment officer with Emerging Global Advisors LLC.
“Many investors, especially in the developed world, are underexposed to commodities from gold, metals to energy to agriculture,” New York-based Kang said in an e-mail Nov. 3. “They are likely to move this up to somewhere between five to 10 percent of total portfolio holdings.”
Gold, up 24 percent this year, has outperformed U.S. stocks and bonds as investors seek to protect their wealth against currency debasement and an inflation threat. Returns on benchmark 10-year U.S. Treasury notes have fallen 7.9 percent this year, Merrill Lynch & Co. indexes show. The Standard & Poor’s 500 Index of U.S. shares is up 16 percent in 2009.
Commodities have displaced stocks as the investment that will offer the best opportunity for profit during the next year, according to a global poll of Bloomberg terminal users. The Reuters/Jefferies CRB Index of 19 raw materials jumped 21 percent this year after slumping 36 percent in 2008 as the economy recovers from its worst recession since World War II.
“Fundamentals started it but now we’re into greater crowd psychology,” Kang said. “We can see gold getting to $1,250 to $1,350 within six months time and if that happens then $2,000 is very possible. The same is with oil.”
‘Placeholder for Cash’
Gold for immediate delivery dropped as much as 0.5 percent to $1,086.73 an ounce before trading at $1,089.28 at 11:10 a.m. in Singapore. It soared to an all-time high of $1,097.72 yesterday. December-delivery gold added 0.2 percent to $1,089.10 an ounce on the New York Mercantile Exchange’s Comex division.
Oil has risen 79 percent in 2009, touching a one-year high of $82 a barrel on Oct. 21. Crude-oil futures for December delivery fell 0.6 percent to $79.92 a barrel on the New York Mercantile Exchange.
Pension funds, hedge funds and other larger institutions will increasingly rely on emerging markets and commodities for both return enhancement and risk reduction, Kang said.
“Investors realize that both traditional bond and stock holdings have limited value and cash earns nothing,” Kang said. “Commodities and especially gold will be seen as a placeholder for cash. Simply replacing gold with the dollar.”
Unemployment and lack of wage inflation means “we can’t rely on the developed market consumer to raise gross domestic product figures,” he said. “Nor can we rely on developed market corporations or governments. All hope lies with emerging markets.”
Emerging Global is a research advisory and fund management firm focused on emerging markets. The company, backed by $40 million in assets, has four funds including metals, energy and mining, listed on the New York Stock Exchange. It plans to launch eight more funds focused on emerging markets, Kang said.
