Wednesday, September 21, 2011

Marc Faber Sees No Bubble in Gold as Central Banks Print Money - SanFrancisco Chronicle

Gold's rally above $1,900 an ounce shows no signs of a "bubble" as central banks continue to boost money supply that has helped spur bullion to a record, according to investor Marc Faber.

"I don't think that gold is in a bubble," Faber, publisher of the Gloom, Boom and Doom report, said in a phone interview yesterday from Chiang Mai, Thailand. "When you buy gold, it's an insurance against systematic failure and problems in the financial markets."
Faber's comments come amid predictions gold may tumble after surging 35 percent this year and touching a record $1,913.50 an ounce on Aug. 23, as investors sought haven asset amid declining equities and weakening currencies. Speculative demand from investors had pushed the gold market into a "bubble that is poised to burst," Wells Fargo & Co. analysts led by Dean Junkans said in a report last month.
"I'd buy every month a little bit of gold," Faber said.
Manufacturing slowed in the U.S. Europe and Asia, adding to signs of slowing global growth that may force central banks to step up stimulus measures.
The Federal Reserve completed its second round of so-called quantitative easing in June, whereby the central bank purchased $600 billion of Treasuries from November 2010, after injecting $1.25 trillion in the first round. Goldman Sachs Group Inc. and Citigroup Inc. see the Bank of England restarting bond buying as early as this week as the economic recovery weakens and bank- funding costs increase.
Gold Holdings
Holdings in exchange-traded products backed by gold rose to a record 2,217 tons on Aug. 8, and stood at 2,142.4 tons as of yesterday. Bloomberg data show. Trade volume in Comex gold futures and options rose on Aug. 24 to a record 593,405 contracts, according to Jeremy Hughes, Singapore-based spokesman of CME Group Inc.
Spot gold gained 0.6 percent to $1,912.38 an ounce as of 1:33 p.m. Singapore time.
Prices may slump as much as 30 percent from a record as the dollar "outperforms" its counterparts, damping demand for bullion as an alternative currency, Stanley Crouch, the chief investment officer of Aegis Capital Corp., said Aug. 24.