Legendary investor Mark Mobius says investors should steer clear of gold until its price drops

  • Investors should not buy gold until a correction takes place, legendary investor Mark Mobius told Financial News.
  • Mobius, who is the founder of Mobius Capital, said as recent as July that investors should continue buying gold even when prices kept on rising.
  • Mobius said in an interview with Financial News: “I would not advise buying gold or precious metals at this time until a price correction has taken place.”
  • Gold has risen about 26% since the start of the year and crossed $US2,000 for the first time this month, its highest ever level, but prices fell last week.
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At a time when gold has caused a flurry of buying from investors to keen not to miss out on the precious metal’s record rally, legendary investor Mark Mobius has some advice: Stay clear of it until a correction takes place.

Mobius, the founder of the eponymous Mobius Capital, told Financial News in an interview: “The safest investments are equities and precious metals such as gold. However, I would not advise buying gold or precious metals at this time until a price correction has taken place.”

This marks a departure from his recent comments Mobius. In July he said that investors should continue buying gold, even when the precious metal first started breaking to new highs.

“When interest rates are zero or near zero, then gold is an attractive medium to have because you don’t have to worry about not getting interest on your gold, and you see the gold price will rise as uncertainty in the markets are rising,” He told Bloomberg at the time.

“I would be buying now and continue to buy. Gold is really on a run I think.”

Mobius told Financial News that investors should be looking at companies with strong earnings instead.

“Shares in companies with strong balance sheets and growing earnings are the best,” he said.

Gold prices have skyrocketed in recent months. Bullion broke the psychologically significant $US2,000 mark for the first time in history at the start of this month.

Expectations of greater stimulus coming to the market, a weaker dollar and geopolitical tensions, particularly between US and China caused the precious metal to soar as investors flocked to safe havens.

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Greater stimulus and low interest rates are positive drivers for gold. This is because when yield and rates are low, investors have to sacrifice less to hold gold, which does not yield any return.

But last week, the precious metal suffered its worst daily drop in seven years, sparking fears whether a major sell-off may be underway.

Gold has risen by more than 27% since the start of the year, making it one of the best performing assets in the year so far.

Gold is currently hovering around $US1,930 per ounce on Thursday.

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The viability of gold’s rally to last has become a source of debate by big investors and market players. Standard Chartered, for example, said Wednesday that gold’s explosive rally is “not quite over yet.