Thursday, June 10, 2010

J.P. Morgan Recommends Investors Get Their Feet Wet

The firm not only upped its price targets for several major producers, but it also recommended a feet-wet position for investors who don't have any exposure to gold.
"It's difficult to buy gold after its strength and close to record highs. However, we feel it's more difficult not to have a gold position in these highly uncertain times. Even at these levels we'd encourage investors who haven't yet entered the gold sector to open a starter position," the analysts told clients in a research note.
J.P. Morgan analysts' long-term price target for gold is a now-raised $950/oz. "The analysts said they expected gold had a 25% chance to go as high as $1,500 an ounce should inflation spike."

Speaking of $1,500 gold, a UBS AG note has economist Dirk Faltin saying flatly that gold will go to that level.
“The price of gold has yet further to rise,” Dirk Faltin, economist with UBS AG, and other analysts wrote in a monthly report. “Any sharp intensification of the sovereign-debt crisis in Europe could propel the gold price even higher, but downside risks should not be discarded lightly either.”

Prices at less than $1,200 an ounce represent buying opportunities, the bank said....
The reason given is the Eurocrisis.

I have to admit to being a little stymied at seeing a recommendation to get into an asset class whose long-term price target is much lower than the current price. It looks to me like someone forgot to tie a few strings together somewhere. Consider this pair of statements: "It's now time for a starter position in oil. Our long-term price target is $55/bbl, raised from $50."



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