Monday, July 16, 2012

Beware China but not Commodities: Faber - CNBC.com

According to Marc Faber there are still opportunities for investment in commodities despite recent volatility, following diminishing demand from China, the world’s biggest consumer of commodities like copper and zinc. “The markets are very volatile and it takes a lot of courage to be short,” Faber said.

“I don't want to be short [on] copper because copper can, like other markets, be manipulated because there are not that many players in the copper market, and so we could see a rally in copper prices, we could see a rally in gold prices and so forth and so on.”

Oil, copper and gold rallied on Friday following China’s second-quarter GDP data, which met forecasts of 7.6 percent and on investor hopes that the Chinese government would continue to cut the benchmark interest to stimulate the economy.  This was the first time China’s GDP growth has dipped below 8 percent since 2009. However, Faber and other investors are pessimistic about the wider impact of China’s slowing growth, saying that he believed the Chinese economy was “rather weak” and that Chinese officials had mis-represented the country’s growth figures.

“I think…investors must realize that the impact of a slowdown in the Chinese economy, which in my view is much larger than what the government has been reporting, the government says GDP has been growing at 7.8%”, he said. “In my view, it's much lower.”

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