Similar to last year, the price of gold has started off the year strong. Since the start of 2015, the yellow metal has climbed about $50 and is currently trading at just over $1,262. After two consecutive years of sitting around the important $1,200 threshold, will 2015 be the year for precious metals?
Marc Faber believes so. In fact, Faber, the famous contrarian investor and publisher of the “Gloom, Boom & Doom Report,” thinks gold will soar 30 percent this year amid the central banks’ expected money-printing initiatives this year.
“I’m positive [that] gold will go up substantially [in 2015] — say 30 percent,” Faber told an audience at the Société Générale’s global strategy presentation in London on Tuesday. “My belief is that the big surprise this year is that investor confidence in central banks collapses. And when that happens — I can’t short central banks, although I’d really like to, and the only way to short them is to go long gold, silver and platinum. That’s the only way. That’s something I will do.”
Faber defended his position by purporting that the we presently maintain “highly inflated asset markets.” In other words, real estate, stock, bond and art prices are artificially high – mainly because of the quantitative easing efforts of the Federal Reserve – while interest rates and short-term deposits are essentially nothing. According to Faber, the only sector that is inexpensive is the precious metals, particularly the precious metal stocks.
With United States stocks being overvalued, Faber thinks emerging markets will also be on a bull run, maybe in the ladder part of 2015. “I don’t think they are that cheap. Valuations are not expensive, but they are not the bargain of the century. But I believe some time in the next six to nine months emerging economies will become relatively attractive.”
S&P 500 to crash?
The so-called “Dr. Doom” of finance further added that the S&P 500 will likely collapse once it reaches 2,500. At the time of this writing, the S&P 500 is trading just over 2,000.
“We may have seen the S&P high, or maybe it will go up another 25%. But then it will collapse,” he said.
Faber warned that monetary policy intervention will likely not assist the index when it does experience its downfall.
He also touched upon the situation in Japan: “Abenomics in Japan will end badly,” he said. “The yen has lost 40 percent of its value against the US dollar over the past two and a half years, so the average Japanese person is 40 percent less wealthy than before. This creates a real challenge for central banks to justify their actions.”
Remember, Faber has been warning for a couple of years of such crashes, but it’s very difficult to pinpoint when certain incidents will transpire – they certainly will. This is why it’s better to take the Jim Rogers approach: self-deprecate, bet on the long-term and outline the problems of all this money-printing and market intervention.
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