Kingsview’s Silverman: Don't Bet Against Gold While Central Banks Are Buying

Thursday, 07 Mar 2013 11:42 AM

By Michael Kling

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Don’t bet against gold. At least not while central banks are still filling their coffers with the precious metal, according to one gold expert.

“When you see central bankers acquiring gold, you can kind of take it like this: You don’t fight in the stock markets when the [Federal Reserve] is easing, so you wouldn’t want to fight the central banks when they’re buying gold, because they have deep pockets,” Philip Silverman, managing director at Kingsview Management, told CNBC.

While stock markets have surged this year, gold prices have fallen 12 percent since October to $1,583 an ounce. Gold typically rises in times of fear and turbulence, but investors now seem confident about the stock markets and the economy. Investors are bailing out of gold exchange-traded funds (ETFs), which hold the precious metal and issue shares.

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Silverman attributes that to a drop in the spot price of gold and believes it will not impact gold’s long-term outlook.

“As far as ETFs go, a lot of hedge funds have been burnt by holding gold in an environment where equities are going through the roof,” he said. “At the same time a lot of commodity trading advisors were getting out of gold and then going short. The selling is much more of a reaction to what’s going on with gold right now. If you take a long-term horizon, it’s a good time to add gold.”

Others disagree.

Central banks will probably not alter gold prices in the near term, Jonathan Barratt, founder of the commodities newsletter Barratt’s Bulletin in Sydney, Australia, told CNBC.

“I genuinely think that the central bank buying is well disguised and if the market really wants to see a further shake out it can. I don’t think the central bank buying will actually hold it up.”

However, Mark Bristow, CEO of gold mining company Randgold Resources, believes central bank purchases will help support the metal’s value, Bloomberg reported.

Central banks increased their gold purchases 17 percent to 534.6 tons last year, the most since 1964, according to the World Gold Council.

In addition, Bristow said mining companies are being pushed to improve returns, which may mean less gold production, according to Bloomberg.

“I still believe there’s more upside than downside in the gold price, particularly if the industry is going to be driven to make those hard decisions,” Bristow told Bloomberg. “I don’t think there’s much room to go below $1,500 this year and I still believe there’s every potential for it to go $200 above that.”

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