BOSTON (MarketWatch) -- Frank Holmes, chief executive officer at U.S. Global Investors, says that gold will hit $2,000 an ounce and that while the move won't be straight there from current levels investors should not be surprised by it.
Holmes noted that virtually all commodities have gone through their "inflation-adjusted 1980 price levels," with the notable exception of gold, and that to get to that range the price of gold would have to top $2,000 an ounce. Holmes said he expects a short-term pull-back in gold -- based on a correction he sees coming in oil and a short rally in the dollar, both of which will impact gold prices -- but that the long-term trend will be strongly upward.
In a radio interview with Chuck Jaffe, MarketWatch senior columnist, Holmes noted that gold correlates to the price of oil 90% of the time -- meaning it moves with oil prices almost all the time -- and has an inverse relation to the dollar 70% of the time. With oil prices on the rise and the dollar weakening, it's a market condition that bodes well for gold, especially because gold is "not at astronomical levels yet, when compared to other commodities ... There's a lot more room."
Holmes also noted that he's more concerned with the market entering a "big deflationary cycle" than he is about Federal Reserve rate cuts sparking inflation, noting that "inflation is easy to stop."
Holmes recommended that investors looking for a plan to follow through the current whipsaw conditions should take a long-term approach that divides a portfolio as follows: 25% in international investments, 25% in resources, 25% in domestic stocks and 25% in high-income and dividend-paying stocks.
In another interview, Stephen McKee, editor of the No-Load Mutual Fund Selections & Timing newsletter, says that current headlines have shown why investors want to look for market momentum rather than value.
He suggested that investors are much more likely to find buying opportunities in gold and natural resources funds, contrarian and hybrid funds -- the latter helped out by a slug of bonds in the portfolio -- and some international issues, although he noted that it appears that foreign funds are starting to slump and lose momentum.
McKee said that "what matters is 'Am I making money today for the risk I am taking?'" and said that investors in great funds that are out of favor with the market will answer that question and realize that it may be time to move away from some old favorites.
Among the favorites that currently are on McKee's list of sells are Heartland Value /zigman2/quotes/204254591/realtime HRTVX +3.13% , Marsico Growth /zigman2/quotes/201432786/realtime MGRIX +3.63% , Fidelity Balanced /zigman2/quotes/203540564/realtime FBALX +2.21% and Oakmark Balanced /zigman2/quotes/202392885/realtime OAKBX +2.56% , as well as Loomis Sayles Bond /zigman2/quotes/201878769/realtime LSBRX +0.71% and American Century Utilities /zigman2/quotes/203331986/realtime BULIX +2.30% .
McKee suggested buying the CGM Focus fund /zigman2/quotes/203752257/realtime CGMFX +4.19% , GAMCO International Growth /zigman2/quotes/203317023/realtime GIGRX +4.23% and U.S. Global Investors Global Resources fund /zigman2/quotes/209500287/realtime PSPFX +2.22% .
He put hold ratings on CGM Real Estate /zigman2/quotes/208625077/realtime CGMRX +3.13% and Buffalo Balanced /zigman2/quotes/209858888/realtime BUFBX +2.92% , characterizing both as funds to "buy on the dips."
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