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Doug Kass: Gold Turnaround Only Temporary

Friday, 28 Jan 2011 | 5:51 PM ET

If Doug Kass has been anything he’s been bearish on gold .

As you might remember Kass told us in December he expected gold would be one of the worst asset classes of the entire year. The widely followed strategist as well as president of Seabreeze Partners and CNBC Contributor predicted the price would decline $250 over a 4 week period.

In fact, his prognostications turned even more bearish just a short while ago. On January 21st he predicted gold would briefly touch $1050 an ounce.

However, Kass couldn’t have known about the unrest in Egypt when he made the call.

Violent and bloody demonstrations have swept across the streets of Cairo and other major cities in Egypt. And now there’s chatter the unrest could spread across the entire Arab world.

In light of all these rapidly developing circumstances we thought it would be a good time to check in with Doug Kass and see if he’s changed his bearish tune.

Does Turmoil Change Gold Trade?
Why political unrest in Egypt is an outlier event for the gold markets, with Doug Kass, Seabreeze Partners Management.

He hasn’t.

According to Kass the turnaround is only temporary.

Kass thinks that matters in Egypt will come under control rather quickly. “It seems there are multiple outcomes in Egypt almost all of which are favorable to risk assets (stocks) and bad for gold," he says in a live interview on CNBC's Fast Money.

Emerging markets trader Tim Seymour agrees. ”This is not an authoritarian state. This is the center of the Arab world and a sophisticated country. I would not take events to mean that Egypt is a nation that’s caving in.”

Looking at the gold trade, Doug Kass believes something else matters much more; signs the recovery is starting to gain traction. Simply stated, in this kind of environment, he thinks investors will find stocks more attractive than gold.

”The consensus is that (unrest in Egypt) will create a temporary floor in the price of gold but I would sell into the rally,” he counsels.

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Trader disclosure: On Jan. 28, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Seymour owns (AAPL); Seymour owns (BA); Seymour owns (F); Seymour owns (FXI); Seymour owns (GE); Adami Owns (AGU); Adami Owns (C); Adami Owns (GS); Adami Owns (INTC); Adami Owns (MSFT); Adami Owns (NUE); Adami Owns (BTU); Adami's wife works for (MRK)l Terranova Owns (VRTS); Terranova Owns (C); Terranova Owns (UPL); Terranova Owns (GM); Terranova Owns (PEP); Terranova Owns (TLT); Terranova Owns (MS); Terranova Owns (POT); Terranova Owns (LTD); Terranova Owns (SU); Terranova Owns (CVI); Terranova Owns (CVE); Terranova Owns (CPX); Terranova Owns (CNQ); Jon Najarian owns (MEE), is short (MEE) calls; Jon Najarian owns (ACI), is short (ACI) calls; Jon Najarian owns (ANR), is short (ANR) calls; Jon Najarian owns (SVVS), is short (SVVS) calls; Jon Najarian owns (EQIX), is short (EQIX) calls; Jon Najarian owns (GS), is short (GS) calls; Jon Najarian owns (WMT), is short (WMT) calls


For Joe Terranova
Terranova is Chief Market Strategist of Virtus Investment Partners, LTD
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BRIAN KELLY
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Accounts Managed By Kanundrum Capital Own VIX calls
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Accounts Managed By Kanundrum Capital Are Short Australian Dollar

For Dennis Gartman SOT 1/28/2011
Funds Managed by Dennis Gartman Were Long Gold during 1/28/11 FMHR

For Doug Kass
Kass has no disclosures on Gold or (NFLX)

For John Stephenson
First Asset Investment Management Owns (AGU), (POT), (CF), Soybean Futures, Corn Futures
Stephenson Owns (AGU), (POT), (CF), Soybean Futures, Corn Futures

For Gordon Johnson
Johnson has no disclosures

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