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Analysts Bullish on Gold, BP Shares—Despite Volatility

Last week’s market turmoil may have rattled investors, but there are still buying opportunities for those looking to get into the market—though analysts differed on the best investments.

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On Friday, world markets sold off on fears that the European debt crisis could be spreading to Hungary. But some analysts don’t believe it’s fair to compare Hungary and Greece, and think that politicians need to be more careful about their comments.

“The problem we have is markets need confidence on the part of policymakers. When politicians make comments that startle markets, confidence evaporates, volatility goes up and equities sell off,” Charles Campbell, senior sales trader at Miller Tabek, said.

Some analysts claim the recovery is stronger than it seems.

“There’s very good reason to believe recovery could be stronger. At the moment, I think central banks will print more money; they can’t afford deflation,” said James Bevan, chief investment officer at CCLA Investment Management.

Investors may be fleeing to “safe haven” assets, but this attitude can be a bit short-sighted, according to Bevan: “I think the bond market is thoroughly overbought.”

Others disagree. Michael Seery, analyst at Olympus Futures, forecasts a potential market selloff due to last week’s anemic jobs data.

“On Friday, that just put water on the fire. We’re not really coming out of it [the recession]. The numbers were really bad after we’ve thrown 800 million dollars on this. What happens if there is negative growth for the next couple of months?”

Seery added, “Bonds are the only thing that’s safe right now.”

Opposing Views: Buy Gold — and BP

Investors at a loss regarding where to put their money should think counterintuitively, according to Campbell. He explained why he’s long shares of the distressed oil company BP—despite it having lost a third of its market capitalization since the oil spill in the Gulf of Mexico that began on April 20.

“It’s a major, major oil company. No one can replicate its North American operations,” Campbell said.

Bevan is optimistic on BP as well: “The impairment in the Gulf will probably cost approximately $11 billion. As a result, the fair value of BP is probably 550 — 600 pence, a lot higher than the current share price.”

Analysts believe commodities prices will remain dependent on the performance of emerging markets.

“A lot of the commodities are collapsing at the moment. Copper, grain, sugar. If China slows down, our stock markets are in trouble,” Seery said.

Gold is the one exception, according to most analysts. “We’ll see assets like gold go up. In the near-term, gold probably has a 10 - 20 percent upside,” Bevan said, "based on the premise that governments will continue printing money.”

Campbell agreed. “Gold has good support because of the safe-haven trade, and the sovereign issues in Europe. I think it’s going to move higher.”

Disclosures:

Bevan and Campbell each own BP shares.