Rickards: Gold Will Go to $4,000

Friday, 03 May 2013 08:43 AM

By Dan Weil

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Gold will likely stay stable until late in the year and then begin an ascent, says James Rickards, senior managing director of Tangent Capital Markets.

The precious metal has dropped 19 percent to $1,460 an ounce early Friday from its October high of $1,795.25.

"To me, what's going on is there's a transition from weak hands to strong hands," Rickards told CNBC. The weak hands are the sellers, including Comex traders, hedge funds and gold exchange-traded funds (ETFs).

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"They're all wrung out now," Rickards said.

"The strong hands are Russia, China and actually people around the world. They lined up to buy physical gold beginning on April 16."

The precious metal dropped to a two-year low April 15.

Gold will rise regardless of whether central banks are successful in fighting off deflation, Rickards noted.

"When central banks fear deflation more than anything, they try everything to defeat it, so currency wars, money printing, zero-interest-rate policy, forward guidance, twist," he explained.

"They do everything they can. When they can't win the battle against deflation, they devalue the currency." And that's all good for gold.

If deflation prevails, central banks could wake up one day with gold at $4,000, Rickards predicted.

A Bloomberg survey of 38 experts produced a median forecast of $1,550 for gold at year-end, a 6 percent increase from current levels.

But not everyone shares Rickards' bullishness. “It’s the end of an era,” Michael Haigh, head of commodities research at Societe Generale, told Bloomberg.

“ETF flows and hedge fund flows have gold changing direction for the first time in a long, long time. Prices are going to be dropping.”

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