Monday, September 19, 2011

Marc Faber: Gold “probably cheaper than when it was $300” - BeaconEquity Research

As the debate moves from how high the gold price can go to whether the precious metal has become too expensive at $1,830, Marc Faber, editor of the Gloom Boom Doom Report,
said the ultimate world’s reserve currency is “dirt cheap.”

Speaking with Newsmax’s,
the eclectic Swiss money manager, who has called Thailand his home for more than 20 years, believes the gold price should be put into a context of its relative value against rapid devaluations of the world’s primary reserve currencies—the U.S. dollar, euro, yen, and British pound—and, now, the Swiss franc, following the SNB decision last week to peg the franc to the declining euro.
“In fact, I could make an analysis to show that the price of gold today is probably cheaper than when it was $300 per ounce based on the increase in government debt, based on the increase in monetary base in the United States and based on the expansion of wealth in Asia,” Faber explained.

Spot gold reached a high of $1,923.70 per ounce on September 6, whose price has since pulled back to the $1,800-$1,850 trading range following the SNB announcement that the franc, de facto, will no longer become a refuge of the currency.

Nearly 18 months earlier on April 26, 2010, Faber told Newsmax he won’t give up his gold as long as the stewards of the U.S. dollar remain in power—as gold’s price in terms of dollars should increase commensurate with its rate of debasement, which, he said, has been at an alarmingly high rate since the collapse of Lehman Brothers in September 2008.

“I own my gold and I will never sell it, especially when I see clowns like Ben Bernanke, Larry Summers, Tim Geithner,” Faber had said.  At the time of that interview, gold closed at $1,151.10 on the COMEX, a 59% rise to today’s price of $1,830.

Today, Faber remains very cautious, recommending to his clients and followers to hedge bets on the outcome of what he calls a “failed Keynesian policy” among governments and central bankers worldwide.  On many previous interviews around the world, he has stated he speculates that U.S. equities have topped this year, emerging markets appear vulnerable to a shock, and U.S. bonds remain in a massive bubble that someday will “end badly.”

How badly?

On Feb. 27, 2011, Faber conducted an interview with Colorado-based precious metals dealer McAlvany Financial Group, and said, “I think we are all doomed. I think what will happen is that we are in the midst of a kind of a crack-up boom [a term coined by famed Austrian economist Ludwig von Mises] that is not sustainable, that eventually the economy will deteriorate, that there will be more money-printing, and then you have inflation, and a poor economy, an extreme form of stagflation, and, eventually, in that situation, countries go to war, and, as a whole, derivatives, the market, and everything will collapse, and like a computer when it crashes, you will have to reboot it.”