Faber: Gold a Better Buy than at $300/oz.

Dr. Marc Faber has been in the news a lot lately, asked repeatedly about the price of gold, and, while there was some confusion about his outlook last week as noted here (Mac Slavo at SHTFPlan going so far as to contact the good doctor to clarify his views and documenting the results here), the preponderance of recent reports point to a very bullish Faber.

There is a growing collection of related YouTube clips submitted in just the past few days and, again, the clear message is that he thinks gold is going higher, not lower. This story at LiveMint is typical of what's been published recently but, upon closer examination, it seems to me that the second comment below is more interesting than the now well known first.

What about gold?

I don’t think that you’ll see gold below $1,000 per ounce probably ever again. So I’m quite positive.

Maybe, gold at this level is a better buy than it was at $300 per ounce in 2001.

At first glance, the idea that gold priced at over $1,100 an ounce is "a better buy" than when the metal traded at about a quarter of that price seems preposterous. But, when you think about it just a little bit (i.e., what constitutes a "better buy" and how the fundamental factors have now swung so decidedly in gold's favor), maybe it isn't a crazy idea at all.

I wouldn't be surprised if, in another eight years - in 2017 - the yellow metal fetches $5,000 an ounce or more which, by my math, would make it a better buy. Gold may not rise as much against other currencies, but, after almost a decade of trillion dollar deficits, that almost seems like a slam dunk when the measuring stick is the U.S. dollar.

Comments

[DiverCity]

You are utterly disingenuous! You have ALWAYS been anti-gold. Why do you intimate otherwise on here?

On Nov 20 12:57 PM CLH wrote:

> Watch the dollar. It seems to be bottoming. Im happy to be out of
> gold now as the bubble grows.

[Fromhere]

Bobby I agree with you.

Over long periods great companies should outperform a static asset. The issue becomes picking the great company. Gold will still be gold in 20 years, but Microsoft, KO, JNJ? How about GE, Citi, or AIG? Fyi - I bought most of my gold position in 2002 when most people thought I was nuts and it's been quite a ride. Now you can't watch TV without seeing an ad for gold, so my guess is we are in/entering the blowoff phase (which arguably can continue for a long time) and I'm starting to think about an exit.

On Nov 19 12:57 PM bobbybutte wrote:

> Fromeher i follow you
>
> But let me add something
>
> Gold was 300 when the S&P was grossly overvalued and many stocks
> like IBM had high pes
>
> Now large cap multinationals are undervalued historically for the
> most part and gold is a very crowded trade
>
> For example is 1990 gold was about 400 bucks today its over 1100
> and the 100K you invested would be be about 275 K but you have gotten
> no income
>
> But if you bought KO in 1990 at teh same pe its at now you would
> have gotten more appreciation in the last 7 years of dividends than
> golds entire cap gain was
>
> You would have been taxed less and also the 100000 you put in Ko
> would have spit you out over 200k in the past 8 years alone
>
> and your Ko would be worth 1,150,000 now
>
> Large cap multinationals are better than gold UNLESS gold is at record
> lows and stocks are overvalued like in most of this decade
>
> Remember what wise people do in the beginning fools do in the end

[CLH]

Watch the dollar. It seems to be bottoming. Im happy to be out of gold now as the bubble grows.

[Dan in mpls]

You stole my post. The nation will not elect a President who promises to balance the budget. McCain did and look where that got him.
It would take some totally out of touch outsider who had a ton of personal charisma and a great pair of legs to hijack the next election. Then out of total ignorance, but with common sense, start running the county like she, er, he or she, was not beholding to either party. That or Mitt Romney, who had actually made a few bucks in his life, keeps coming to mind.

[Carlos Lam]

On Nov 18 09:03 PM test213 wrote:

> Marc assumes that deficits will continue forever. But if the government
> starts focusing on deficit and debt reduction, then gold upside may
> be capped.

If you believe that government will decrease deficit spending and the debt, then I have oceanfront property into Indiana to sell you...

[Carlos Lam]

On Nov 18 04:52 PM Steve in Greensboro wrote:

> Thanks, Mr. Iacono, the another great note. Gold will certainly
> drop when the U.S. equity market corrects, as will all commodities.
> It did when the markets corrected in 2008, but it dropped less than
> equities and has gone up more. I expect the same relationship between
> equities and gold at least through the end of 2010.

What you write is possible, though it is also possible that the reckless printing of Chmn. Bernanke will trigger a currency crisis sooner than we expect. In such an environment, it is true that equities may fall. However, a dollar currency crisis would--in my opinion--speed a movement toward gold. We shall just have to wait and see.

[yellowhoard]

We're in the middle of an 18 year secular move in gold.

The last few years of any secular move are always the most exciting.

[auto44]

Try using 1998 instead and tell me how things work out.

On Nov 19 12:57 PM bobbybutte wrote:

> Fromeher i follow you
>
> But let me add something
>
> Gold was 300 when the S&P was grossly overvalued and many stocks
> like IBM had high pes
>
> Now large cap multinationals are undervalued historically for the
> most part and gold is a very crowded trade
>
> For example is 1990 gold was about 400 bucks today its over 1100
> and the 100K you invested would be be about 275 K but you have gotten
> no income
>
> But if you bought KO in 1990 at teh same pe its at now you would
> have gotten more appreciation in the last 7 years of dividends than
> golds entire cap gain was
>
> You would have been taxed less and also the 100000 you put in Ko
> would have spit you out over 200k in the past 8 years alone
>
> and your Ko would be worth 1,150,000 now
>
> Large cap multinationals are better than gold UNLESS gold is at record
> lows and stocks are overvalued like in most of this decade
>
> Remember what wise people do in the beginning fools do in the end

[auto44]

These numbers sound suspicious to me.

On Nov 19 12:57 PM bobbybutte wrote:

> Fromeher i follow you
>
> But let me add something
>
> Gold was 300 when the S&P was grossly overvalued and many stocks
> like IBM had high pes
>
> Now large cap multinationals are undervalued historically for the
> most part and gold is a very crowded trade
>
> For example is 1990 gold was about 400 bucks today its over 1100
> and the 100K you invested would be be about 275 K but you have gotten
> no income
>
> But if you bought KO in 1990 at teh same pe its at now you would
> have gotten more appreciation in the last 7 years of dividends than
> golds entire cap gain was
>
> You would have been taxed less and also the 100000 you put in Ko
> would have spit you out over 200k in the past 8 years alone
>
> and your Ko would be worth 1,150,000 now
>
> Large cap multinationals are better than gold UNLESS gold is at record
> lows and stocks are overvalued like in most of this decade
>
> Remember what wise people do in the beginning fools do in the end

[auto44]

yuk!!!!!!!

On Nov 19 08:31 AM Fibozachi wrote:

> Please put that call up on the wall right next to Dick Bove's US
> Dollar to zero; utterly ridiculous and without any technical merit.
>
>
> Technical Profiles of Gold vs Silver, the US Dollar vs Gold and the
> US Dollar with highlights from an interview with the winner of the
> 2008 Automated Trading Championship
>
> www.zerohedge.com/arti...
>
>
> As for a quick overview of price action within the primary domestic
> equity and international currency markets ... yesterday’s internal
> market readings were reflective of only one thing: HFT algos attempting
> to pin XOM et al. ahead of OpEx as the DJIA takes decisive leadership
> across domestic equity markets while the NDX-100, SP-500 and RUSSELL
> 2K considerably under-perform. For a more detailed explanation of
> this concept, please see “Technical Profiles of 8 Key Stocks: AIG,
> BIDU, CAT, CELG, DRYS, GS, IBM, SKF.”
>
>
> VOLD lame … ADD weak … TICK highly erratic while the VIX continues
> to coil lower and register serious positive divergences on the weekly.
> The $DXY US Dollar Index plotted a new swing low yesterday at 74.68
> yet reversed sharply to close well over the 75 handle. ONLY a 135
> minute (1/3 the cash) or 144 minute close above 75.77 will shift
> the hourly profile from bearish to neutral; and until there are two
> consecutive closes above 76.89 there is NO uptrend to speak of. The
> EURO appears to be initially confirming a possible USD bottom. Swissie
> (CHF) and EuroYen (EURJPY) are the next two majors/ crosses needed
> to confirm any possible US Dollar bottom.

[Fromhere]

To say that buying any asset at a higher price is a better buy than a purchase of that same asset at a lower price is factually ridiculous. What Dr. Faber is really implying though, is that the bull case for gold is much stronger now than it was five years ago, which I would argue is reflected in the higher price - i.e. that's why gold has gone up so much. While I agree with his implication, which is why gold is my largest single investment currently and has been for many years, I find myself increasingly uncomfortable in a growing consensus. After all, absolute conviction is what makes market tops.

[The shark]

Gold will retest $680.00 before the middle of 2010. However, after that once we have worked our way through all the "flations" - starting with a small degree of DE and a 5 year IN period, starting somewhere mid to late 2011 - then Gold will continue it's bull run - probably to above $2,800 by end 2011. My guess though this will have more to do with the USD - which should bounce soon, with the USD/EURO returning to around 1.27/ 1.30 (mid 2010) and then working it's way back to around 1.65 by late 2011.

The next "agenda bomb" for me are the currencies. Every nation wants to boost manufacturing so that it can grow employment - most if not all do not have enough domestic consumption to expand the manufacturing base sufficiently and will need a growing export market - a weak currency or at worst a fair valued currency that balances this need is a critical success factor - Governments around the world will manipulate and if necessary commit economic suicide in achieving this end. It will be disastrous for global trade and will have a "handbrake" effect on the worlds recovery.

The next 5 years will be extremely volatile with many false dawns in our journey to recovery - unfortunately in this game of "who blinks first" the East will win - China in particular has greater political freedom in the sense that decision making is more central and more absolute, they have bigger cash reserves, they have more immediate local consumption demand potential (given that they have a growing middle class who are consumption orientated) and they have regional momentum and diversity into which each Member country can tap into.

Whilst conscious of the devastation that this unfolding economic global realignment will have on all of us it is never the less and interesting time given the infinite possibilities that this change may bring - hopefully in the end a better place for our children to live out their dreams and aspirations - INSHA'ALLAH

[oldgoldbug]

I think you bring out an important divergence. Gold (GLD 111.35) is just off new highs yet none of the majors (AEM, ABX, NEM etc) nor GDX is making new highs. Let's not forget SLV (18.01); shouldn't it at least be somewhere near $30? Not to say it won't happen; long term I am actually quite bullish on all of the above. But short term it looks to me that gold is going to catch a cold and gold stocks as well as most common stocks are about to catch pneumonia. These markets appear to be way overbought. Jim Rogers is probably right that the dollar is due for a decent rally which will be a great excuse for investors to book profits and induce a significant correction.
Scary as it sounds on a long term basis TLT (95.39) might be a good place to hide for a little while, especially for common stock proceeds. One thing for sure; I would hedge long term gold holdings with puts rather than sell.

Disclosure: Long silver for long term; long silver puts short term

On Nov 18 08:42 PM thotdoc wrote:

> What does Gold being up today while GDX, ABX and other Gold ETFs
> down tell us?

[Zmartmoney]

With so many entities gaming the system for all they're worth, anything can happen at any time. This isn't a financial market, this is a roulette wheel.

[Fibozachi]

Please put that call up on the wall right next to Dick Bove's US Dollar to zero; utterly ridiculous and without any technical merit.

Technical Profiles of Gold vs Silver, the US Dollar vs Gold and the US Dollar with highlights from an interview with the winner of the 2008 Automated Trading Championship

www.zerohedge.com/arti...

As for a quick overview of price action within the primary domestic equity and international currency markets ... yesterday’s internal market readings were reflective of only one thing: HFT algos attempting to pin XOM et al. ahead of OpEx as the DJIA takes decisive leadership across domestic equity markets while the NDX-100, SP-500 and RUSSELL 2K considerably under-perform. For a more detailed explanation of this concept, please see “Technical Profiles of 8 Key Stocks: AIG, BIDU, CAT, CELG, DRYS, GS, IBM, SKF.”

VOLD lame … ADD weak … TICK highly erratic while the VIX continues to coil lower and register serious positive divergences on the weekly. The $DXY US Dollar Index plotted a new swing low yesterday at 74.68 yet reversed sharply to close well over the 75 handle. ONLY a 135 minute (1/3 the cash) or 144 minute close above 75.77 will shift the hourly profile from bearish to neutral; and until there are two consecutive closes above 76.89 there is NO uptrend to speak of. The EURO appears to be initially confirming a possible USD bottom. Swissie (CHF) and EuroYen (EURJPY) are the next two majors/ crosses needed to confirm any possible US Dollar bottom.

[Laurence Hunt]

Marc is known for being quite cryptic at times, as well as for shifting his perspective rapidly. However, he has remained a bull on gold for the entire bull run. If we are looking at an accelerating rate of change (likely), his numbers could certainly work. I certainly think that using the CPI to estimate the 1980 value of gold is a bogus exercise. That is, $2000+ is a radical underestimate. Now would $5000 be a transient level prior to stabilization of the USD or a launchpad to currency collapse? That is the next question. The USD as we presently know it (really, the Federal Reserve Note) could certainly be inflated out of existence. The hatred of the gold standard is actually driving gold higher, as the money printers pretend that there is no objective standard. I read Marc's book. This is part and parcel of what he is talking about - long cycles and the psychological principles that drive them.

[JudeJin]

half of the world's annual gold production is consumed by india and china. much richer europeans, americans and japanese are still sleeping.

[Beach Bubba]

Nothing, how long have you been at this game?

On Nov 18 08:42 PM thotdoc wrote:

> What does Gold being up today while GDX, ABX and other Gold ETFs
> down tell us?

[thotdoc]

What does Gold being up today while GDX, ABX and other Gold ETFs down tell us?

[a fat panda]

"At first glance, the idea that gold priced at over $1,100 an ounce is "a better buy" than when the metal traded at about a quarter of that price seems preposterous. "

Even if Faber isn't correct, it is certainly not preposterous. The ounce is constant where as the dollar isn't. The dollar has been in a steady decline since 2001. So comparing the cost in 2001 dollars and 2009 dollars isn't an apple to apple comparison.

More important is the fact that gold is a store of value not an investment. Gold can't mate and make little nuggets. It wins when the dollar is losing. So the market is telling you that gold at $1,100 is going to hold value better than the dollar will. It may not be right it is certainly not preposterous.