Tuesday, July 5, 2011

Marc Faber: Buy gold at $1400

LONDON (Commodity Online): Global economic analyst and commodities forecaster Marc Faber says any commodity that is dependent on China is not reliable these days. He also said the current corrections in Gold are short-term, and if the gold price goes to $1400, it would be the best time to buy the yellow metal.

Faber, who is the editor and publisher of the widely popular Gloom, Boom, and Doom Report said that he wishes to stay away from any commodity that is linked to Chinese growth.

Faber, in his July economic outlook on commodities, stocks, bonds and gold, said that there is a possibility for economic slowdown or crash in China.

Following is the July global outlook from Marc Faber:

Commodities: Even though Dr. Copper bounced off its 200 day moving average, Faber would stay away from any commodity which is dependent on Chinese growth. The probabilities of a significant slowdown or crash in China have increased recently.

Gold: As Faber mentioned last month, gold is undergoing a short-term correction, which is natural during a bull market. The correction could take gold to as low as $1400. This would represent an excellent buying opportunity for investors. To counter the anti-gold crowd, Faber emphatically states that gold has not reached a major top and is likely to trend higher later this year.

Stocks: The stock market is going to rally in the short-term (July-August), but equities will not surpass their previous highs reached back on May 2. After this bounce, Faber believes the market will decline sharply to around 1100 on the S&P 500 (during the September-October period). This is when the Fed will likely consider implementing QE 3 to stimulate asset prices.

Bonds: The rally in US Treasuries is over and investors should take profits.

Dollar: Everyone and his brother loves to hate the US dollar and expects it to decline further. While Faber despises the dollar long-term, he thinks it is attractive compared to the Euro. In fact, Faber recommends investors short EUR/USD as the situation in Europe is likely to deteriorate. The recent bounce in EUR/USD provides a good entry to initiate a short position.

Money Market Funds: Faber is increasingly concerned about holding money market funds because of their exposure to European banks estimated at around $800 billion. This is why the 1 month T-Bill recently went negative. Faber says that he plans to reduce his exposure to money market funds.

Australian Real Estate: If you have been lucky enough to have owned Australian real estate over the last few years, you may want to take profits. The Australian housing market is in a bubble and is very susceptible to a housing crash. The likely catalyst for the sharp decline would be a major slowdown in China, which would depress demand for commodities.

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