May 26, 2022

Marc Faber’s Surprising Gold Forecast

remembranceIn 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.

Courtesy: kitco.com

Courtesy: kitco.com

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.

“Sentiment on Gold and Bonds Incredibly Negative” – Marc Faber Predicts Endless QE

Liberty-EagleIts hardest to buy at bottoms since you never know where the bottom is.  Equally hard to do is to buy when the sentiment is incredible negative as it was in early 2009 for stocks and 2000  for gold and silver.

Marc Faber, editor of Gloom Boom & Doom Report discussed the current status of the global markets and investment strategies on Bloomberg Television.

Faber said that the sentiment on gold and bonds in incredible negative and that the Fed, regardless of who winds up replacing Bernanke, will be forced to engage in endless monetary stimulus.   According to Faber “as I said already three years ago, we are going to go with the Fed to QE99.”

Faber notes that the cost of living continues to increase  on a global basis and the benefits of QE are mainly benefiting the richest members of society who hold large amounts of assets.  As money printing destroys the purchasing power of the middle class there will be worldwide social unrest which has already erupted in numerous countries.

As to what the price of gold will be at year end, Mr. Faber declined to speculate saying that “I am not a prophet but I will continue to buy gold.”

Smart Money Investors Assess Gold Market

Given the recent extreme volatility in worldwide financial markets, Barron’s interviewed their Roundtable Panelists for an assessment on where we are headed next.   Three of the smart money investment pros interviewed gave their insights on where they think gold is headed next.

Here’s what they had to say:

1.  Investor Felix Zulauf thinks that the stock market will see new lows in the fall and that eventually both the Fed and the European Central Bank will step in to support the financial system.  Although Felix feels that providing additional liquidity is not a solution, “if we don’t do it the system will break down.”  According to Felix, at some point, as the problems get bigger, central banks may hit the panic button and wind up “like Zimbabwe”.  The increasing price of gold reflects the loss of confidence in policy makers, central banks and the currency.  Felix’s recommendation for a bleak future – “own a lot of gold, and don’t have debt.”

2.  Fred Hickey, who is editor of The High-Tech Strategist, also sees the Fed being forced to initiate more quantitative easing as economic conditions deteriorate.  The drawback of more money printing, however, is that “the Fed…can raise the nominal prices of assets – but not the real prices, because inflation will rise.”   Hickey, who owns both bullion and gold ETFs think the better play right now is in gold mining stocks since they have lagged the price increase in gold bullion.  Hickey is recommending Agnico-Eagle Mines (AEM), Newmont Mining (NEM) and Yamana Gold (AUY).

3.  Marc Faber, Editor of The Gloom, Boom & Doom Report, sees a short term bounce in stock prices and a possible correction in gold of $100 to $150.  After a rally off oversold levels, Marc thinks stocks will drift lower due to concerns over sovereign defaults, a dollar crisis, continued social upheaval in the Middle East and developed countries in the West, recession, lower corporate profits and the possibility of a “bust in China.”   As for the gold market, Faber remains long term bullish saying that “As long as the trio of Obama, Geithner and Bernanke are in power, gold is destined to move higher.  Long term treasuries have no value.  They will default by paying interest in a worthless currency.”

Bill Gross, head of investment firm Pimco, while not specifically addressing the gold market, is also bearish on the economic outlook for the the United States and implied that the more quantitative easing is the only option left.  According to Gross, the recent Fed announcement that it will keep interest rates at zero for another two years “indicates that monetary policy has been exhausted, while fiscal policy is hammerlocked by the results of the debt ceiling debate.”

Gold is beginning to look more and more like the only safe haven in a dangerous world.