INTERNATIONAL. Equity strategist Christopher Wood, whom the Wall Street Journal dubbed in 2007, at the start of the subprime crisis, as "the man who saw it coming," recently told a conference in Japan that gold will hit US$3,500 an ounce by 2010.
The US is facing a deflationary collapse more severe than the crash that hobbled Japan’s economy in the 1990s, leaving gold as the only defensive play for investors, he said.
Speaking at CLSA's annual Japan Forum Conference last week, Wood said: “The collapse of securitization is a much more deflationary situation in the US than anything seen in Japan when the bubble collapsed in the early 1990s. What we need in the future is a more fundamentally disciplined system, even at the cost of higher levels of growth.”
Gold is likely to more than triple from the current level to US$3,500 in 2010, he said. ”It’s the only form of money or credit not contaminated by the credit system - and the fact it’s still money is that central banks still own a lot of it), the global paper currency system will steadily deteriorate, eastern and central Europe will face a full-scale currency collapse, putting huge pressure on western Europe."
The only realistic course for the US is radical action to nationalise its most stricken banks and create one big “bad bank” to take on their toxic assets, he warned. Anything short of that will bring about more economic chaos and drag on other economies.
Wood, who in 2003 predicted the US housing crisis and the subprime crisis, has been consistently rated among the top equity strategists on Asia - most recently by Institutional Investor magazine.