MARKETS SPECTATOR: Guru's golden tick

The executive chairman of Templeton's emerging markets group says gold is now a buy, and he's also optimistic about commodities generally.

Mark Mobius, the bald headed champion of emerging markets, is a gold bull.

Answering questions on his Twitter account about gold, political risk and Thai stocks, the executive chairman of Franklin Templeton Investments' emerging markets group says “the recent decline in the price of gold presents opportunities for us”.

The spot price for gold has declined 16 per cent this year to $US1403.84 a troy ounce, according to Bloomberg data.

Mobius says the decline in the price of bullion this year was caused by the derivatives market, not the physical gold market. He says the quantitative easing by global central banks where they have injected billions of dollars into the world financial system has made him a positive on bullion.

“Given the rapid increase in money supply all over the world, it is not hard to foresee an eventual acceleration in inflation,” says Mobius. “As currency becomes less valuable in the face of plentiful supply and the concomitant inflation, gold can be one inflation hedge.”

When the price of spot gold fell 7.6 per cent in April, according to Bloomberg, gold imports into India, the largest gold market in the world, rose to $US7.5 billion from $US3.3 billion in March and $US5.7 billion in February, says Mobius.

“This shows Indian families, who value gold very highly for weddings and just regular savings, decided to buy more gold at the lower prices,” he says.

Mobius forecasts that commodity prices, including gold, will rise.

We think the long-term trend for commodities generally still looks bullish, but there are likely going to be periods when commodity prices, including gold, face corrections,” he says. “The short-term volatility in gold and some other commodities this year has triggered questions and doubts, but our view is that the demand for these commodities should continue to increase as emerging markets develop.”

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