The legendary investor's view on oil and gold is the same: they're both headed lower in the short term and higher in the long term.
Taking a contrarian view, as usual, of the latest downmove in commodity prices, legendary investor Jim Rogers believes prices are headed lower in the immediate term but will bottom out this year or early next.
A long-term bull on crude, Rogers stuck to his years-old hypothesis that consumption is growing at a faster rate than production -- "except for US shale, which isn't sustainable at these prices" -- and termed the current overproduction from Saudi Arabia as a "geopolitical and artificial" move, one that will peter out soon.
"Oil will bottom out in the USD 30s even if there's an economic crisis [in the world]," Rogers, who is credited with calling the bottom in oil prices in the late 90s, said.
Rogers also commented on gold, another commodity where he got in early years ago and has been cautious about after its multi-year bull run. His view on the yellow metal is the same as on oil: prices are headed lower in the short to medium term but will surge again in a few years.
"I own gold but haven't bought fresh in the past few years. However, if it goes below USD 1000, I will buy," he said. "In five to 10 years, there will be major turmoil in the world and people will again reach out for gold."
Below is the transcript of the interview on CNBC-TV18.
Sonia: It has been a complete collapse that we have seen in crude prices in the last couple of months, in fact halved from the levels that we saw last year, what is the sense you are getting, do you see more downside in store?
A: What happens when you have a big drop in any asset is there is a big bounce -- in America we call that a dead cat bounce -- then we go back and we test the low. So we are now testing the lows of last year.
I suspect that the test will continue for a while because there is a lot of turmoil in financial market but the lows will probably be made this year or early next year. Maybe they will be lower than the old  lows. We are in the process of making a complicated bottom in energy worldwide because energy reserves are declining everywhere.
Latha: Your sense is that Brent, for instance, could remain at current levels or average out at USD 45 for maybe 12 months now?
A: I am not smart enough to know how it will average out. You should watch CNBC India to find out the answer to that. But I would suspect that even if crude goes to the low USD 30s, that will be the bottom and we will see higher prices 2-3 years from now even if there is a worldwide economy problems, because reserves continue to decline everywhere.
Latha: How are you looking at the metals index or the metals complex? Would you bet on any of them since they are also at multi-year lows?
A: If by metals you mean things gold and silver, we will start there. I own gold and silver. I have hedged some of my gold and silver. I am not a buyer of gold and have not been for a few years, but if gold goes under USD 1,000 per ounce, I hope that I am smart enough to buy more because in the next 5-10 years we are going to have a lot of turmoil in the world.
And in times of serious turmoil, many people will reach out for gold and silver to save themselves. In my view gold will turn into a bubble sometime in the next 4-5 years at which point I hope I am smart enough to sell. But I am not buying now, I am waiting to buy lower.
Sonia: But, coming back to that point you were making about crude, what is your assessment about the situation currently? Is it that the demand crack-down could get worse and there could be lower demand going ahead? Or is it a supply glut that continues to hit crude because for a market, for an economy like India, it is beneficial to us that the fact that crude is falling, but just to a certain point. Beyond a point you start worrying about the demand slowdown globally.
A: You are right. The low prices are very good for most people in the world and more use energy than produce energy. So, low prices are good for the majority of the world. But, what has happened is that the US is negotiating with Iran and Russia, so they went to the Saudi and told the Saudi to dump oil. Saudi Arabia was happy to do it to try to do something about the cracking.
This has been a political move more than anything else. As you know, Saudi has been selling a lot of production. So, in the meantime, world reserves are declining. The world has been using more oil than it has been producing for some time. So, this is an artificial move, a geo-political move, call it what you will and when Saudi Arabia can no longer sit and dump oil, then we are going to see higher prices again.
Latha: You have been a veteran of many such commodity cycles, how many years do these down-troughs last? Should we expect it to last for a goodish bit or are we already nearing the end of this cycle?
A: As I said, I suspect that the energy making its bottom. It will be making a bottom sometime here in the next few months, even if the world does have economic problems because the supply will be under serious pressure.
Agriculture likewise; agriculture is going to be facing serious supply problems in the future and if we have bad weather of course, we will have even worse supply problems.
But, most commodities will be making a bottom in the next year or so if not before, even if we have economic problems worldwide because of the supply side. Remember, we commodities it is supply and demand you then have prices going higher even with low demand if supply dries up.The Great Diwali Discount!
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First Published on Aug 26, 2015 09:08 am