Jim Rogers Says Gold Will Reach $1,000 as Commodity Prices Soar
April 19 (Bloomberg) -- Jim Rogers, the former George Soros partner who foresaw the start of a commodity rally in 1999, said the boom in energy and raw material prices will endure, driving gold to a record $1,000 an ounce.
``The shortest bull market for commodities lasted 15 years, the longest 23 years,'' Rogers, 63, said in an interview. So if history is any guide, ``they've got a long way to go.''
Prices of crude oil, copper and zinc are at records, and other commodities are at multiyear highs, as speculators and hedge funds seek investments delivering greater returns than stocks and bonds. Global demand led by China, the world's fastest growing major economy, has outstripped supply curtailed by lack of investment and output disruptions.
``Supply and demand is terribly out of balance for nearly all commodities right now,'' Rogers said in Singapore April 17. ``This is not a bubble.''
Gold for immediate delivery reached a 25-year high of $624.70 an ounce today, still below an all-time peak of $850 for spot gold in 1980. Crude oil rose to a record $71.60 a barrel in New York yesterday and copper gained the most in nine years.
``Economies around the world, especially in Asia, are growing very rapidly,'' said Rogers, who co-founded the Quantum hedge fund with Soros in the 1970s.
China Demand
China, home to 1.3 billion people, grew 10.2 percent in the first quarter, up from 9.9 percent in the previous three months, fueling demand for energy and raw materials in homes, factories and cars. The country is the world's biggest consumer of steel, copper and zinc and the second-largest user of energy.
``Nearly everything makes a new all-time high in a bull market,'' said Rogers. He didn't predict when gold would reach $1,000 an ounce.
The Goldman Sachs Commodity Index of 24 commodities rose to a record yesterday, led by gains in metals, sugar and natural gas. The index has increased 13 percent this year, compared with a 4.8 percent gain in the Standard & Poor's 500 stock index. Benchmark U.S. Treasuries have lost about 1.6 percent, according to Merrill Lynch & Co. indexes.
Lack of investment in new supply is driving up prices.
``Nobody has discovered a major oilfield in over 35 years. All the major oilfields are in decline,'' said Rogers. ``Unless someone does something quickly, the price of oil is going to go a lot higher over the next decade.''
He depicted a similar scenario for metals. ``Nobody has opened any major mines anywhere in the world for many years and it takes a long time to bring new mines on stream,'' he said. ``All the old mines are in the process of being depleted and demand is continuing to grow.''
Agricultural Commodities
Agricultural commodities may offer new investment opportunities. ``That's where prices have moved least.'' Cotton prices are more than 50 percent below their all-time high; soybeans are 60 percent below their peak and sugar 80 percent, Rogers said. ``These agricultural commodities are very cheap on any historical basis,'' he said.
Rogers, who lives in New York, traveled through China by motorcycle and car as part of trips around the world to pick up investment ideas. The journeys culminated in the books ``Investment Biker'' and ``Adventure Capitalist.'' Rogers also wrote the book ``Hot Commodities.''
The commodity index fund he started in late 1998 has more than tripled.
To contact the reporters on this story:
James Poole in Singapore: Jpoole4@bloomberg.net
Jeremy Naylor in London: jnaylor@bloomberg.net
Last Updated: April 18, 2006 20:29 EDT
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