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'Political crisis and the QE tapering no big deal for Thailand'

Larry Edelson

Larry Edelson

Eastern Capital president Larry Edelson, a leading gold and market forecaster who claims to be the world's biggest gold trader, says Thailand's political crisis and the US monetary policy are no big deal. Krungthep Turakij TV's Chaowarat Yongjiranon spoke to him about his unique perspective.

What is the trend for gold in 2014?

We should finally see [the gold price bottom out] in the early part of 2014, as soon as February, maybe as late as May. The point is the three-year bear market [that] started in 2011 in gold is going to end very soon. And we are going to see another [price surge], probably over [US]$5,000 by the end of 2016 - $5,000 per ounce.

In the past few days gold has been doing pretty well. What do you make of this?

I think it is a little bit of a bounce. We got down to roughly $1,180 on the last day of 2013, so there is a little bit of a bounce going on. I don't make a lot of it. I don't think the bottom is in yet. I think we will go a little bit lower, down to around $1,100, over the next one to three months, but then the bottom will be in and we will see a new bull market again in gold for the next at least three years.

What do you make of the latest surprising non-farm payroll reports from the United States?

Well, the US economy is back on its feet. It's wobbly. It won't be what it was several years ago. We will see some continued slow growth in the US economy, but investors have to realise that there is a big shift going on, the shift from the West to the East. We are seeing the rise of Asia and we are seeing the decline of Europe and the United States.

But other analysts think differently. They say the double-digit growth that we have seen in Asia or the emerging markets is gone.

Well, I don't agree with that. China, yes, is having its slowest growth rate since 1999, but it is still 7.5-per-cent GDP growth. In the US you are lucky to see 2-2.5 per cent. In Europe, I wouldn't be surprised if you see negative economic growth in 2014. Europe is for all sense and purposes in a depression.

Wouldn't that have some negative results on economies that rely on exports?

Yes, but Asia is also turning more inwards, towards domestic consumption. We are seeing that throughout the Asean Community. We are seeing that in China, where they are shifting much more towards emphasising domestic demand. I think there is a break going on between the West and the East. If the US and Europe slump again, that does not necessarily mean that Asia is going down. I don't agree with that scenario. I am one of the only ones that say that, but I am usually alone in my forecasts.

Are you optimistic or pessimistic about the recovery in the United States?

There is a recovery from the depths of the worst in 2008-2009. But we are not going to see the US get back to 4-5-6-per-cent growth in my lifetime or in yours … The government is still bankrupt, very bankrupt. It is running on fumes, if you will. There is nothing in the tank to keep it going.

What about a possible bubble in the US stock market?

On the long-term basis it is not a bubble. The bubble was in the US bond market. That market was the bubble. Investors are now taking [their] money out of the US bond market, realising that Washington is bankrupt and will never be able to fix that … Basically investors are saying we are going to vote against the US government, but for the US stock market. And you are seeing also a lot of money come out of Europe, which is in very bad shape.

What about the QE tapering?

No big deal. I think it is overly worried about. Interest rates need to rise. They should rise. They were held at artificially low levels. The tapering [of the US Federal reserves quantitative easing programme] will not have a negative effect other than perhaps a very short term, a day or two at the most, when they taper. But if you look back on history, the best bull markets in stocks and commodities, especially in gold, occur with rising interest rates, not with declining interest rates.

So can you compare the capital markets here in Asean? Which one is attractive right now?

Well, the most attractive in my opinion is none other than Thailand, believe it or not.

Is it just because you are based here?

No, it is not. I am one of those contrarian types of investors, kind of like Warren Buffett. I like to buy when there is a lot of fear and I like to sell when there is a lot of greed. And there is a lot of fear in Thailand right now. And again, if you study the markets in detail you will often find that when there is a political crisis or a financial crisis and the market is down, those are the best opportunities to buy, because it is not the end of the world. The crisis that is occurring in Thailand right now, it might drag [on] for a month, three months, we don't know, but it will make some sort of progress ultimately.

There is a lot of debate over the large amount of money that is being spent, whether projects worth Bt2.2 trillion will help develop the economy. What would you say the country needs to do now?

The infrastructure project is probably No 1. If it continues to be stalled because of the political situation or it is completely thrown out for some reason, I am not even worried about that. The reason is Thailand is in a very good position to lead Asean. If the government can't, for whatever reason, finance the infrastructure development, the private sector will come in, because they see the opportunities.




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