Bullish case for gold: economist

Spartan Capital Securities chief market economist Peter Cardillo tells Reuters' Fred Katayama why he sees gold catapulting more than 30% to $2500 an ounce next year.

Video Transcript

FRED KATAYAMA: Stocks on Wall Street rebounding Thursday afternoon after spending much of the morning in the red. Let's get a read of the markets from Peter Cardillo, Chief Market Economist at Spartan Capital Securities joining me now from his New York office. Welcome back, Peter. Peter, weekly jobless claims dropped more than expected, cracking below the 800,000 level for the first time since March. As an economist, what's your read on the state-- what does this say about the state of the jobs market and the economic recovery?

PETER CARDILLO: Well, today's number obviously points in the right direction, and we're seeing some movement. But we still have a long way to go. You know, you still have high levels of unemployed. And if we don't get a stimulus package soon, a lot of the unemployed are going to be losing their benefits. And that just puts them even in a hardship way. And that will obviously weigh grossly on consumer spending going forward.

But I do remain optimistic that a deal is coming. I believe that we'll get a deal announced before the elections. However, passage of the deal is not likely to happen until the elections are over with.

FRED KATAYAMA: Gold is falling on that better-than-expected jobs report. Are you bullish on the prospects for gold? It's had a good year.

PETER CARDILLO: I'm very bullish on gold. Over the past two, three months, it's had erratic movements, huge gyrations. And it's very common nowadays to see the price move within a 1.5% to 2% trading range. And it all depends, you know, on the circumstances of the day. Yesterday, we had a nice rally. The day before, we rallied nicely. And that was due to the dollar, which, you know, got weak over the past several days. And today, it basically rebounded.

And I think that's the reason why we saw the drop in gold, the steep drop that we saw today. But I think what-- what you need to focus on is the long-term outlook for gold. And that looks very positive. Look, I think we're headed for a dollar crisis. And I think that that's all going to be due to these huge deficits that we have. I'm sure you're fam-- you recently saw the huge trade deficit-- a record.

And it also-- you know, you could make an argument that maybe if there's a change of guard at the White House that taxes are going to go up, and that might begin to take a bite into some of the deficits. But they're so far out of whack at this time and so big that the chances of having any-- of seeing any real improvement in the deficit is slim at best. And so I think we're headed for a dollar decline.

FRED KATAYAMA: I see. So-- so what you see is the dollar declining, gold rising, and the deficit bl-- rising and backing the gold.

PETER CARDILLO: Yeah. Commodities will rise with the price of gold.

FRED KATAYAMA: All right. And how much more upside do you see for gold, let's say over the next year or so?

PETER CARDILLO: Well, I was calling for $2,500 by the end of the year. Obviously, I'm probably going to be wrong on that call. But I do believe that we'll see gold sometime next year reach $75-- $2,500, and possibly move even higher. And that's based on what I just said a few moments ago.

FRED KATAYAMA: So it's trading around just north of $1,900 today an ounce. It's not too late to get in, then

PETER CARDILLO: Oh, absolutely not-- not for the long-term. If you're a short-term trader and if you want to buy gold thinking you're going to make 3% to 5% real quick trade, I doubt that very much unless you're a scalper or a daily trader, where you could trade for a percentage or two percentage points profit. But for the long-term, you should be in it, and you should use it as a hedge.

FRED KATAYAMA: OK. Hedge against inflation. Thanks a lot, Peter, appreciate it.

PETER CARDILLO: Thank you.

FRED KATAYAMA: Our thanks to Peter Cardillo of Spartan Capital Securities I'm Fred Katayama in New York. This is Reuters.