Tags: marc faber | gold | invest | stocks

Faber: Buy Gold, Gold Mining Shares as S&P 500 Continues to Plunge

Faber: Buy Gold, Gold Mining Shares as S&P 500 Continues to Plunge
Marc Faber (Getty Images)

By    |   Tuesday, 12 January 2016 08:33 AM


Marc Faber, editor of the “Gloom, Doom & Boom Report,” advises investors that now is the best time to buy gold and gold-mining stocks because the rest of the volatile stock market will continue to tumble.

He recently told MarketWatch that the stock-market downturn could result in the S&P 500 hitting lows not seen in five years.

Faber warns that the S&P 500, which ended Monday trading at 1,924, could drop to its 2011 low. "According to FactSet data, that would be 1,099.23, set that October. Faber referred to that outcome, a more-than-40% plunge in the broad stock-market benchmark, as his 'medium bearish' scenario. His most bearish prognostication envisages the S&P 500 falling back to its 2009 nadir, which FactSet data put at 676.53," MarketWatch reported.

“The main factor is diminishing global liquidity because of the decline in oil prices,” he told MarketWatch.

A rapid appreciation of the U.S. dollar may send Brent oil as low as $20 a barrel, according to Morgan Stanley.

Crude oil steadied near $32 per barrel on Tuesday, recovering slightly as investors booked profits after it fell to a near-12-year low on concerns about oversupply and fragile demand from China, Reuters reported. 

Benchmark Brent crude fell to a low of $30.43 per barrel, a level last seen in April 2004, before recovering to $31.75, up 20 cents or 0.5 percent. U.S. crude West Texas Intermediate (WTI) fell to a low of $30.41 per barrel, a level last seen in December 2003, before crawling back to $31.06, down 35 cents or 1.11 percent.

Faber explains that the price of crude oil indicates a shrinking global economy.

“When oil prices increase, it basically is a consequence of expanding [global] liquidity,” Faber said, so inversely, this unrelenting fall suggests contraction.

Faber did caution that the situation could change because of global central bank tactics.

“It is impossible to make predictions because we don’t know the extent of the madness of central bankers,” he said. He has been a harsh critic of the quantitative easing measures of the Federal Reserve and other global central banks.

Faber says investors would be wise to seek safe haven in gold (currently at $1,086 an ounce) and the gold miners exchange-traded fund (GDX).

And even though Faber is known as “Dr. Doom” for his dire predictions, he’s not the only one who has warned about dark storm clouds on the nation’s economic horizon.

U.S. stocks are nearing the end of a long bull market, according to investment strategists at Goldman Sachs Group Inc. who cater to the bank’s wealthy individual clients, Bloomberg reported.

"We expect a few more innings and are cautiously optimistic," according to the 2016 outlook report by the bank’s private wealth management unit. "We expect modest single-digit returns for a moderate-risk, well-diversified portfolio given current equity valuations and the level of interest rates."

Steady growth expected in the economy and corporate earnings means clients shouldn’t reduce their allocation to U.S. equities, according to "The Last Innings," which was released today and co-authored by Sharmin Mossavar-Rahmani, chief investment officer for the bank’s investment strategy group, and Brett Nelson, head of tactical asset allocation for the unit.

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Marc Faber, editor of the “Gloom, Doom & Boom Report,” advises investors that now is the best time to buy gold and gold-mining stocks because the rest of the volatile stock market will continue to tumble.
marc faber, gold, invest, stocks
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2016-33-12
Tuesday, 12 January 2016 08:33 AM
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