Marc Faber goes for gold again in 2011
Posted on 04 January 2011 with 5 comments from readers
The world’s top-rated investment newsletter writer Dr.Marc Faber goes into the New Year with all guns blazing for gold in the first issue of his celebrated Gloom, Doom and Boom Report.
He chides the global investment community for failing to recognize the devaluation of their assets in terms of precious metals over the past decade, and their failure even now to acknowledge the strength of gold as an investment class. He gave the same message in Abu Dhabi last summer (click here).
Over the New Year is a good time for background reading. And ArabianMoney has been casting an eye over Rich Dad’s ‘Guide to Investing in Gold and Silver’ by Mike Maloney, published in 2008.
Financial storm
This comprehensive guide can be bought from the left-hand banner of this website, and its conclusions are astonishingly perceptive given the events of the past three years. Back then Mr. Maloney saw a storm coming in financial markets and forecast that the Fed might have to ‘lower interest rates to almost zero’, and more:
‘In uncertain times, investors around the world run for the perceived safety of government bonds. I believe, this time around, they will get slaughtered. When, not if, the creditworthiness of the US government is downgraded, their bonds, just like mortgage backed securities, will be sold at huge discounts…every new dollar printed expands the money supply of every type of currency except two. Gold and silver are the only currencies they can’t print’.
Mr. Maloney goes on to conclude that history will repeat itself: ‘When a civilization debases its currency supply, all the currency will once again come chasing the same tiny little pile of metal, and gold and silver will revalue themselves measured in those currencies. This will happen in the United States, just as it did to every empire’.
End game
How long will this process take? ArabianMoney reckons two to three years for a final spike or blow-off in precious metals to $5,000 for gold and $320 for silver. You are going to have corrections along the way, and you may or may not see one in a couple of weeks time.
But hanging back and missing out on the investment opportunity of the decade is none too bright either. We would prefer to risk money on silver producing a higher return than gold for the simple reason that historically this has always been the case and it is not likely to be different this time. Then there is the recent removal of price fixing as a reason for backing silver now (click here).
Marc Faber got gold in 2002 with the publication of his book with the self-explanatory title ‘Tomorrow’s Gold’. He is unlikely to be proven wrong in 2011.
5 Comments posted by readers:
He must have seen the Bill Gross interview on Bloomberg TV over the weekend on the future of the US economy. His next ‘Investment Outlook’ on the PIMCO website http://www.pimco.com.us will be very interesting when it is published in a few days. I loved his preying mantis analogy for the US Congress and their spending habits. It applies perfectly to much of Wall Street too.
I’ve said before, on this website, that when Marc Faber gives an investment recommendation, we’d all be wise to listen carefully, and then heed his advice (unlike Goldman Sachs or George Soros!).
I wonder how ArabianMoney arrives at $320 per oz for silver by the end of the upward rise in 2-3 years. This would take my current holding to over $1m.
There was a recent prediction in Arabian Money that the gold:silver ratio would drop to 35:1 and I’m sure that $320 was mentioned in that article. Yet $5,000 for gold and $320 for silver is a ratio of 15/16:1 which is altogether different from 35:1 (according to my sums).
Marc Faber and none of the other analysts put war into their predictions, as far as I know. This $320 for silver per oz does not factor in war within the above stated 2-3 year time period. I may be considered alarmist about this but, today, on the BBC lunchtime news, Jeremy Bowen, Middle East editor for the BBC was stating that if the current efforts to get Israel and Palestine talking fail, then there will be war this year.
Besides, Israel must attack within two to three years to avoid being exterminated by Iranian nuclear weapons. And even if this is an incorrect assessment of Iran by Israel, Israel may still attack “just in case”.
So what would a middle east war sliding into a world war, using nuclear weapons, do to this predicted $320 for silver in 2-3 years time? Would it make it more likely or less likely or probably little difference? Does anyone out there, including Marc Faber, have an opinion on this infuriatingly relevant factor of war?
Ed Note: the centuries old gold:silver ratio is 1:12 – so you are right silver could go higher than our predictions. We already have two wars running in the Middle East so a third would not be much of a surprise – whether it would be long or a minor event is harder to tell – but that would be enough to spike precious metal prices.
Marc Faber has in fact predicted war on many occasions. When and where are not known.
Ed and Philcu, I was thinking specifically of a world war and a particularly nasty one with nuclear weaponry, which is new from the start of a world war. I am encouraged by Ed’s comment that war makes bullion spike upwards but I was told it spiked downwards when the Iraq war started.
However, it’s presumably the same problem again: Where do you put your money when a particularly vicious world war is underway? Presumably in bullion for more and more people.