(Kitco News) - The veteran investor who warned in May that the metals selloff had further to run says the bottom is now close, and that he plans to start buying again this year.
Gold and silver still have further to fall before they bottom, but that bottom is now close, according to veteran markets commentator Clem Chambers, who told Kitco News he plans to start buying the metals again before the end of the year.
Chambers, author and founder of the financial website ADVFN who is known for blunt, plain-spoken market calls, said gold is likely to bottom near $3,500 an ounce, with silver settling somewhere between $40 and $50. The call follows a slide that has pulled gold down to around the $4,000 mark from a January record near $5,600, and cut silver by more than half from its peak above $120 earlier this year.
"It was a bubble rally, and they always pull back a long way," Chambers said. "Everybody believes the bubble until it bursts, and they keep believing it all the way back down. And that's the tragedy of bubbles."
He described his silver target in his usual plain terms. "Fifty is the roof of the basement, forty is the floor of the basement," he said. "For gold, that's probably three and a half thousand dollars. It could be a little bit lower."
Chambers, who in a May interview with Kitco News warned that silver's pullback was an "aftershock" with another heavy leg lower still to come, said the worst of the price damage is nearly over, even if a rebound is not imminent.
"We're back into stacking mode very soon," he said, referring to the point at which he would begin dollar-cost averaging back into gold, silver, platinum and palladium. "I will start itching under fifty, and I will start thinking about picking up some bars at that point. But I'm not thinking about plunging and then expecting it to explode. I'm expecting it to go sideways for quite a long time," possibly a couple of years, he said, before the next major move higher.
Why gold fell
Ask Chambers why gold fell, and he does not start with the Federal Reserve. He starts with war, or more precisely, the fading threat of one.
"Gold goes up before a war. Gold is for war, because it's a currency during war," he said. "So during a war, you have to sell your gold, like Russia is doing, and I'm sure Iran is doing." He tied the turn lower to easing tensions between China and Taiwan earlier this year, which he said removed one of gold's most powerful use cases.
That view is only part of the picture. Gold's retreat has also coincided with a hawkish shift at the Federal Reserve under Chair Kevin Warsh and a rise in U.S. real yields to the top of their multi-year range, both headwinds for a metal that pays no income, according to World Gold Council research. And the selling has not been universal. North American gold funds have shed tonnes this year while Asian funds and central banks have kept buying, according to World Gold Council data, with the People's Bank of China adding gold for a 20th straight month in June.
Chambers said the metals will ultimately move much higher, driven by what he expects to be a heavily inflationary decade. "We're about to go into a seriously inflationary period," he said, arguing that the buildout of artificial intelligence and the reshoring of Western industry will require enormous money printing.
A warning for silver holders
Chambers offered a caution for retail investors who own physical silver, warning that the price on the screen is not always the price a seller can get.
"It was down 80% of the screen price, 70% of the screen price," he said of the recent selloff. "Nobody wanted to buy it at the top of the market," because dealers feared being left holding metal that could fall overnight. "The pipeline is choked."
His advice, he said, is to plan the exit before buying. "Get your exit sorted," Chambers said. "You don't have to sell, but always know how you're going to sell."
AI, and a British value hunt
Chambers, who has argued the real money in artificial intelligence lies in the physical infrastructure rather than the headline models, said the debut of low-cost Chinese model Moonshot Kimi K3, which rattled AI-linked stocks this week, does not change that thesis.
"The models are the tip of the iceberg, and they don't really have a good moat around them," he said, pointing instead to the chips, memory, cabling and power beneath them. "AI will boil the oceans," he said, and it runs on electricity. "China has 250% more energy generation than America. AI is energy," he said. China does hold a wide and growing lead in electricity generation, though international data put the gap at closer to two times U.S. output rather than the larger figure Chambers cited.
He said he has been buying cheaply valued technology companies in the United Kingdom, many of which are being acquired by better-funded American buyers, a trend he does not expect the new government of Prime Minister Andy Burnham, who took office Monday pledging a "new economic model," to reverse quickly. "Nvidia is worth more than all the British stocks put together," Chambers said, describing a London market he believes has been "trashed" by taxes and regulation. Asked whether Burnham could turn it around, he said simply, "I hope so."
The bottom line for investors
For viewers who bought near the top and are sitting on losses, Chambers was blunt but encouraging, framing markets as a skill to be learned rather than a bet to be placed.
"If you FOMO'd into it, that was a mistake. Learn the lesson," he said. "It's a skill game. You need to study, and you need to work at it." His summary was characteristically direct: "Greed will get you, and study will make you money."
The current environment, he added, is as volatile as any he has traded since 2008, but he said the opportunity is real for those who keep their composure. "The quick and the smart and the hardworking and the active will do extremely well," Chambers said. "The passive, the scared, that's not going to be good for them."
Watch the full conversation with Clem Chambers in the Kitco News video at the top of this page.