In an interview with ET Now, Marc Faber, Editor and Publisher of the Gloom, Boom & Doom Report, speaks about a possible December Taper of quantitative easing, whether it’s a good time to be buying physical gold or mining shares and his crude oil sentiment. Excerpts below:
ET Now: The noise for possible December taper is getting louder versus a few days back when it was almost consensus that the taper will only happen in 2014. On the contrary, you did not expect the FED to taper. Are you still sticking to that viewpoint?
Marc Faber: Basically, we will have next year a new FED Chairman, Janet Yellen. In order to gain some credibility, she may decide, as the FED Chairman, to implement a cosmetic tapering that would be, say, $10 billion a month or $20 billion a month. In general, the asset purchases by the FED will not be reduced, but actually increased.
ET Now: So would you advise investors to shift to gold only? Has it bottomed out?
Marc Faber: I have been advising people to have an exposure to gold for the last 15 years or so and the price of gold rose between 1999 and September 2011 very rapidly from $255 to over $1900. We are now slightly over $1300. The price of gold at this level is not terribly high compared to the wealth creation in the world, compared to the expansion of central banks’ balance sheets, compared to the debt explosion. So yes, I continue to recommend people that they allocate some of their money to gold.
ET Now: Would you advise investors to own physical gold or gold mining stocks?
Marc Faber: I prefer physical gold, but I have to say that numerous gold mining shares are now very inexpensive compared to the overall S&P and compared to the price of gold. The share market will always have a fluctuation above on the upside and below on the downside. For example, property stocks will go up more than the property price and when the property market goes down, property stocks drop more than the market. Same is the case for gold shares. They go up and down more than the gold price.
ET Now: Crude of late has been slightly toppy. Are you still bullish on crude?
Marc Faber: Yes, crude oil is probably among the most attractive commodities because the supply of oil could be interrupted at some point. I am aware that the production in the US and Iraq is going up, but by and large in order to bring on new oil reserves today, the price has to be, say, above $80. So we are not that far above production cost at the present time.
Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.