Marc Faber’s Surprising Gold Forecast
In an interview with Barron’s, Marc Faber, editor of The Gloom, Boom & Doom report gives his take on where the gold market is headed and why certain investments related to gold might be very risky.
Marc Faber, never at a loss for a good soundbite, says gold is “in a correction mode” but seemed at a loss to explain why gold has dropped by over $400 per ounce over the past two years.
Faber talks about the paradox of weak physical gold prices even as demand for physical gold remains robust. Although gold has declined in price and commentary on the gold market is extremely bearish, Faber notes that countries such as China is buying 2,600 tons of gold per year “which exceeds annual production.” The gold market is currently in a “bottoming out process” and gold will see higher prices in the future according to Faber.
Many of the senior gold mining stocks represent good values but in a surprising comment Faber warns investors that many exploration companies “won’t make it so buy companies with cash reserves.” Current gold prices mean that “few projects will get done.” Faber’s bearish commentary on the smaller exploration companies seems to imply that he does not foresee a rapid short term recovery in the price of gold.
With central banks printing money at a rate that would have been unimaginable five years ago and huge demand for physical gold in Asia, the price of gold may recover to new highs faster than Faber expects.