Eleven years into a gold bull market, Marc Faber publisher of the Gloom Boom and Doom report still doesn't think gold is in a bubble. Joining us via Skype from Chiang Mai, Thailand Thursday, Faber told the Daily Ticker's Aaron Task there are fundamental reasons why gold, already nearly 30% higher for they year, will continue to gain value.
Faber admits the price of the precious metal may remain volatile; after hitting a new high of $1923.70 on Tuesday, gold has fallen about $100 per ounce.
But in the long-term "gold will be very well supported" because of global demographics and the continued debasement of fiat currencies, including the U.S. dollar. Compare gold prices to the amount of wealth created in the emerging markets over the last decade and the increase in the monetary base around the world, the price of gold is "relatively low," says Faber. Compare it to the quality of politicians and at $1,800 per ounce gold is "dirt cheap," he half jokes. He won't put a price target on the metal but he does say, "according to some statistics the gold price today should be worth between $6,000 per ounce and $10,000 per ounce." If that's true, then "dirt cheap" might be the right phrase.
Monetary policy is not only buoying the gold market, it's also responsible for the recent market turmoil, Faber says. "I have argued for years that the Federal Reserve with its artificially low interest instead of creating monetary and economic stability it has created more instability by creating the Nasdaq bubble, the housing bubble, the commodities bubble and now creating a giant government debt bubble."
That's not to say Faber is uber-bearish on stocks. He thinks stocks will remain range-bound for the rest of the year and that the see-saw market will persist for the foreseeable future. He predicts global stock markets will go up and down at least by 20-30% annually for the coming years.
For now Faber recommends investors stay diversified: 25% in stocks, 25% in real stocks, 25% in gold and silver and 25% in cash.
- Marc Faber