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Jim Rogers' Gold Investment Philosophy

The maverick investor explains why he prefers to hold gold coins and his rationale for gold prices to continue to rise over the next decade

Chris Menon 7 May, 2013 | 9:00AM

Jim Rogers, the legendary maverick investor, recently spoke to Morningstar about investing in gold. Below are excerpts from the interview.

Chris Menon: What, in your opinion, caused the recent fall in the price of gold?

Jim Rogers: Gold had gone up 12 years in a row, without a down year, which is extremely unusual in any asset. Equally important, gold has only had one 30% correction in 12 years. Again, that is extremely unusual. Most things correct 30-40% every year or two. So the action in gold has been very unique and gold needed a correction.

The main thing that caused it as far as I am concerned was that the market was ready. It needed it and it is good for gold to have a proper correction.

Whenever there is a correction people always find reasons. Cyprus was going to sell its gold, which means other European countries might have to. There were various and sundry things that came up. At the time bitcoin was collapsing. A lot of people that own bitcoin own gold.

The main reason is that gold needed a correction. It had had only one proper correction in 12 years. So it finally came. I hope this is the proper correction.

Menon: Some people have argued that it was manipulation that caused the fall in gold. What is your view on this?

Rogers: I’ve been hearing that argument for gold and silver for about 30 years. Even if someone can manipulate a market for a day or two they can’t manipulate it for a month or two or three. So I don’t put much stock in that.

Menon: Would you say that the recent price is or isn’t a buying opportunity for investors?

Rogers: For nimble people it probably is. You have enormous negativity and enormous collapse. So usually if you buy at the time of collapse you make money if you are a good trader. I am not a good trader.

I am waiting for what I hope will be a better bottom, if it comes. We may have had the bottom. I did not buy, am not buying, but certainly that kind of collapse nearly always in history--no matter what the asset is--you should buy that kind of collapse. I did not.

Menon: What sort of price would tempt you in?

Rogers: I have no idea! At $1,300 I would probably buy some. $1,200 I would buy some more. $1,100 I would buy even more. $1,000, if I’m still solvent, I would buy even more .

You know 50% retracement would be around $960. 50% retracements are very common in markets. I am not suggesting it is going to get there but those sorts of numbers are common.

Menon: Over what time horizon should investors expect to make money by investing now?

Rogers: Certainly, over the course of ten years gold will go much, much higher because I don’t see any possibility that governments are going to stop printing money in the next decade. And as long as that’s going to happen then gold is certainly going to go higher and probably much higher.

Menon: For novice investors, what would be the best way to gain exposure to gold?

Rogers: There are various ways, you can buy coins or bars or futures. Futures are where you get the best leverage but you’d better know what you’re doing or you’re going to get wiped out pretty quickly. But you can also get extremely rich pretty quickly if you know what you are doing, if you get it right.

Or gold mining stocks. But if you are going to buy gold mining stocks be sure you get the right one because more money has been lost in gold mining stocks over the past 100 years than any other asset class, including railroads and airlines. So be sure you get the right stock if you are going to buy a gold mining stock.

Menon: Are there any particular gold mining stocks that you’d say are worth looking at?

Rogers: I don’t own any...I prefer coins.

Menon: What sort of gold coins do you buy?

Rogers: US, Chinese, Canadian, Australian, Austrian. Austria has some very beautiful ones. British sovereigns. Those are the ones that I think of....And I have bought a few North Korean gold coins.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

About Author

Chris Menon  is a financial journalist writing for Morningstar.co.uk.

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