Investors should “lighten up” on gold and buy more crude oil because the risk of a global economic slowdown is overstated, said James Paulsen, the chief investment strategist at Wells Capital Management.
The CHART OF THE DAY shows that an ounce of gold buys about 23 barrels of oil, the most since March 2009. The metal reached a record $1,881.40 an ounce on Aug. 19 amid mounting concern that the economy is faltering. On Aug. 9, crude dropped below $80 a barrel to the lowest price since September 2010.
“Investors should go through their portfolios and take advantage of people’s fear and the rush to safe-haven assets by lightening up on those safe-haven assets and buying all the stuff people have thrown out of the window,” Paulsen, who helps oversee about $340 billion, said in a telephone interview from Minneapolis. “The price difference is quite striking. Play that spread. You’ll be pretty happy six months from now.”
Gold may drop “a couple hundreds of dollars” when “we find out the economy is going to do better than we feared” by the end of September, Paulsen said. “The markets are medicating themselves, getting the stuff they need to reaccelerate, including lower mortgage rates, lower energy cost, a weaker dollar and a surge in money supply.”
While gold will “participate in” the commodity rally over a longer term as the global economy rebounds and the dollar weakens, oil will do better, he said. “Gold is expensive relative to many commodities right now.”
Gold futures for December delivery gained 6.3 percent last week to close at $1,852.20 on the Comex in New York. The metal has advanced 30 percent in 2011, after posting annual gains for 10 straight years. Crude-oil futures are down 10 percent this year, closing on Aug. 19 at $82.26 a barrel on the New York Mercantile Exchange.
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