Given the abundant speculation about the Federal Reserve and interest
rates, Marc Faber told CNBC last week he believes the Fed is
closely watching the market reaction to its intimations it may raise rates in
June. If the market reacts very negatively, it could hold off raising rates,
while a relatively stable market could signal the OK to the Fed to raise the
rate by a quarter-point.
Generally, higher interest rates support a higher U.S. dollar and weaken
demand for gold as gold does not pay any interest.
However, Faber says he believes that the Fed will not raise interest rates
next month. "My view is that in June, they [the Fed] will not move; they
will not increase rates," Faber stated. "The market will begin to
perceive that the Fed wants to support active markets, which they have stated
on numerous occasions before," he added.
In that environment, "gold, which from now on may correct, maybe 5%
or so, will start to move up again," Faber said.
Faber recommends a diversified portfolio. "To own some real estate
makes sense, to own some equities makes sense, to own some cash and bonds
probably makes sense, and to own some precious metal makes sense."
But Faber's view is some sectors will do better than others. "I can
see more money printing in the future, which will lift some sectors,"
Faber said and went on to name them: "The most attractive assets in my
view are gold shares and oil and gas shares. I think they still have
significant upside potential this year."
Disclosure:
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an employee of Streetwise Reports.
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