Jim Rogers believes the commodities supercycle may have another two to five years before the bubble bursts, he told The Bullion Desk, adding that he is still bullish on gold and awaiting further buying opportunities.
“Commodities will end in a bubble by the end of the bull market, whenever that is – whether that is in two years’ time or five years’ time,” the author and hedge fund manager said. “Bull markets normally end in a bubble and this one may be no different.”
Asked whether he favoured the longer or the shorter ends of his predicted timetable, he said: “I doubt the timeframe is two years; it will probably last longer than that. But no, it is definitely not over, not with all this money printing going on.”
“I don’t think this will last another 10 years – but who knows, governments are still printing money so this could go on much longer than anyone expected,” he added.
The key drivers remain limited supply and loose monetary easing, Rogers said, warning that “we haven’t seen the full effects of quantitative easing yet”.
“There is still staggering amounts money floating around, with huge artificial oceans of excess liquidity – this is the first time in recorded history that all the world’s major central banks simultaneously printed large amounts of money, from the EU, to the UK and the US. This has never happened before, so this is not over yet.”
The US is currently in the process of slowing the rate at which it expands the monetary base. Under its third quantitative easing programme (QE3), it bought $85 billion in bonds per month but it has slowed the pace of its monthly purchases to $35 billion per month.
Still, it has printed more than $4 trillion dollars to boost the US economy since rolling out QE1 late in November 2008.
The UK and Japan have also previously embarked on QE but the EU has not yet done so, recently opting for negative interest rates instead.
There are often periods of consolidation in bull markets and the current run in commodities is no different, Rogers also said.
“I remember between 1982 and the end of the century, in the stocks bull market, we saw several corrections,” he added. “In 1987 stocks were down 40-80 percent worldwide and it took a long time for it to get above pre-correction levels but the bull market was not over. We are seeing the same normal correction happening in commodities now.
Rogers remains bullish on gold in the long term: “I still own gold – though I’m not buying at the moment. But if there is another buying opportunity in the next year or two, I will buy because it will go much, much higher. Gold will be one of the final commodities to end in a bubble in this cycle.”
Gold reached an all-time high of $1,921.12 per ounce in September 2011, having rallied from a base of about $250 at the turn of the millennium. Since reaching these highs, however, it dropped to a low of $1,180 late last year, prompting many to say the bull market was over.
But it has since recovered and was last at $1,322 per ounce, little changed from its overnight close but little more than $10 off recent 14-week highs.
Jim Rogers is a bestselling author, financial commentator and successful international investor. Rogers was a co-founder of the Quantum Fund (considered to be the first truly international fund of its kind) and is the creator of the Rogers International Commodities Index (RICI).