Bloomberg Radio Interview with James Turk
Date May 22, 2006
Time 03:00 PM - 04:00 PM
Location New York City
Program Bloomberg On The Money
CHARLIE STEIN, co-host:
For a look at the metals market, let's talk with James
Turk, founder of GoldMoney.com.
James, thanks for being with us this afternoon.
Mr. JAMES TURK (Founder, GoldMoney.com): Thanks.
It's a pleasure to be here.
STEIN: OK. As we've reached a peak of, you know, around
$720 on gold, we're down to $657. Is the correction over?
Mr. TURK: Well, it's too early to say. The $640 area,
where we saw good support, could very well hold. I think
we need a few more days of testing to conclude that the
HOWARD LIBERMAN, co-host:
Fundamentally, in your view, is it still a bull market,
Mr. TURK: Absolutely. The problems that have been driving
gold higher have not been solved. Inflation is worsening.
The outlook for the dollar is still pretty bleak. People
are seeing gold as a safe haven. So, this correction
represents an opportunity to buy gold cheaper than it was a
couple of weeks ago.
STEIN: Now, the dollar has rallied a bit over the past few
days. Do you think it's just kind of a respite, and the
Mr. TURK: Yes, absolutely. We've taken out some key
supports on the dollar. And more to the point, you know,
there's a lot of uncertainty created from Mr. Bernanke's,
you know, recent statements. And the federal budget
deficits aren't getting any better. You know, all of these
things are, you know, continuing to worsen the outlook for
LIBERMAN: So, is gold different from copper, and zinc, and
aluminum and--and some of the other metals out there in
that those things are used in making stuff, and gold is
really seen as an alternate currency?
Mr. TURK: Yes. Exactly. Gold is the only commodity that
is produced for accumulation. Every other commodity is
produced for consumption. Gold's accumulated because it's
LIBERMAN: So, if that's the case, when we look at what had
been happening with gold regarding the dollar, it had been,
pretty much, in lockstep for quite a while with the dollar.
The dollar went higher, gold fell. The dollar fell, gold
went higher. But we moved away from that a few months ago.
And that's when you really kind of saw gold break out on
its own. Why did that happen and what is that telling you?
Mr. TURK: Well, it happened not just against the dollar.
It happened--it happened against all of the world's major
currencies. In other words, the price of gold was rising
against the dollar, against the Euro, you know. You name a
currency and gold was rising. Basically, it was rising
because, you know, of--central banks around the world are
inflating their currencies. There's a lot of paper that's
being created. And that's debasing those currencies and
their purchasing powers. And that's what we call
inflation. And inflation is continuing to--to worsen.
STEIN: James, we're going to ask you to hang on one moment
while we check in on the market.
* * *
STEIN: We're talking about gold. It's settled up by 20
James, one of the things that hasn't changed in the gold
market, and in a lot of the commodities, there's--a lot of
money has come in. There's exchange rated funds. There
are investors who feel they need to be there. Has that
created more volatility, and in some ways, distorted the
Mr. TURK: Yeah. There probably is more volatility. You
know, typically when you see more traders coming in and
more people speculating on the price, you do get more
volatility. I think the important point though is that
this cycle, it still has a long way to run. Normally,
commodity cycles last, you know, 10 or 15 years, like the
one from the late '60s to the early '80s. We're only a few
years into this one, so I think we've got many more years
left in it.
LIBERMAN: So, based on all the things we've been talking
about, James, and what's sparkled, it's interesting. Gold
was down pretty much all day. Towards the end of the
session, gold futures were up about 20 cents. It's
settlement time, they're back down again. Where do you see
gold going? If it's around $655 an ounce right now, how
long before we get--or do we get back to that all-time high
Mr. TURK: Well, my target for this year has been, you
know, $600 at a minimum. We've well passed that. And I
said that $850, I thought, was a reasonable level. So, I'm
still looking at $850 as doable sometime during the course
of this year.
You know, with--with regard to playing it, you know, my
view is people should have a consistent plan, where month
in and month out they accumulate gold down here at these
levels. Because even though it's come up quite a bit over
the past couple of years, on a relative basis, it's still
LIBERMAN: Go ahead, Charlie.
STEIN: Do you think that this diversification play by
investors, both institutional and individuals, continue?
And does that kind of give a--create kind of a floor under
the price of gold?
Mr. TURK: Yeah. The floor is clearly in the 500s, because
something different happened back in December. When we
went above $500, we took out a 25-year high. And people
around the world saw that as a wake-up call, and they
started moving into gold. So, you've got good physical
demand, around the world, underlying the market. And
ultimately, it's the physical demand that drives the price.
And I think it's going to ultimately mean the price of gold
is going much higher.
But the point you're making about diversification is a good
one. People see gold as a good diversifier, and
are--particularly now, with stocks getting nervous, and
people getting nervous about stocks again, and etc. You
know, I think you're going to continue to see people moving
LIBERMAN: This issue of--of just continually buying gold
month in, month out, adding to your position, James. Do
you want to add more when you get a pullback like we've
seen? Or if--if you're going as high as you maintain, you
just keep putting whatever number of dollars you want into
gold every month, and--and eventually you get something
worth a lot of money?
Mr. TURK: Yeah. I don't try timing it. I'm in favor of
dollar cost averaging when it comes to gold. Particularly,
you know, given the fact that gold is still relatively
You know, there are two ways to buy gold. You can
speculate on the price or you can diversify your portfolio
by accumulating it. The latter strategy is much more
conservative, and probably more prudent, for most people to
follow. Trading gold, you know, could be pretty tough.
STEIN: Is there a fixed percentage of one's portfolio you
Mr. TURK: Well, historically, the rule of thumb has been
around 10 percent. You know, it's hard to make a sweeping
generalization because everyone's circumstances are
different. But I would say 10 percent is a good rule of
thumb. But maybe even a little higher than that, given the
fact that gold is so relatively undervalued.
LIBERMAN: James Turk, thanks for being with us.
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