Dr Marc Faber has again urged people in the world to be diversified, own physical gold and to be their own central bank.
Dr Marc Faber on Gold
In another fascinating interview with Bloomberg, Dr. Marc Faber covered Japan's massive QE experiment, the slump in oil prices and the importance of diversification and owning physical gold.
The interview was extensive and he covered a lot of ground which helped put the current major economic trends in perspective. The editor of the the Gloom, Boom and Doom Report, is always contrarian but always measured in his insightful analysis.
Japan's foray into QE as a "ponzi scheme" in that "all the government bonds that the Treasury issues are being bought by the Bank of Japan" according to Faber. He said that in the short term Japan may not have to face consequences because "most countries are engaged in a Ponzi scheme."
But he warned that "it will not end well."
When the interviewer put it to him that various economic indicators such as jobs numbers in the US were positive recently he countered that these statistics" are published by the Obama administration, and therefore I would be very careful to take every figure for granted."
He pointed to first-time home-buyers in the US, the number of which are at thirty year lows.
"A lot of people are being squeezed very badly because the costs of living are rising more than their salaries and wages." The low home-buying figures show that people simply cannot afford to buy houses anymore demonstrating that no amount of cherry-picked statistics can gloss over the fact the US economy is not in good shape.
He also mentioned his long maintained view that inflation and deflation are not uniform phenomena but that "in some sectors of the economy you can have inflation and in some sectors deflation." The implication of this is that, again, government statistics are not necessarily an accurate reflection of the state of the economy.
He does not see long term weakness in the oil market. The current low prices, while they may be advantageous to western consumers are damaging those companies in the U.S. who took on large debts to develop oil drilling projects. And Saudi Arabia cannot run it's social system, he reckons, if prices go below $70 for an extended period.
The consumption of oil in the developing world is increasing from a very low base in comparison to the West.
"So I think the long-term trend for demand is up, but obviously the decline of oil prices, some people blame it on Saudi Arabia and some other blame it on the US and who knows what, the fact is maybe the decline in oil prices tells you that the global economy is not recovering as all the bullish analysts think, but actually it’s weakening. Yes, weakening."
To support this contention he argued that European economies are stagnant and China is in a slowdown. The knock on effect of this is that industrial countries are not buying commodities from resource-rich countries who in turn are not buying manufactured products from the West.
This means that "you have the potential of a downside spiral."
Singapore Freeport
With regards to gold being at four-year lows he said "it’s been a miserable performance since 2011. However, from the late 1990 lows we’re still up more than four times. So I just looked at performance tables over 10 years and 15 years. Gold hasn’t done that badly, has done actually better than stocks."
When asked about Goldman Sachs negative outlook on gold, he mischievously said "I would say Goldman Sachs is very good at predicting lower prices when they want to buy something."
He added, "now I personally, I think that we may still go lower. It’s possible. I’m not a prophet, but I’m telling you I want to own some gold because I don’t trust the financial system anymore. I think the whole thing is going to collapse one day and then I’ll be happy to have some assets. But of course the custody is important. I wouldn’t hold my gold at the Federal Reserve because they will lend it out. I wouldn’t hold my gold in the US at all."
In terms of custody, Dr. Faber has been a long time advocate of storing gold in Singapore. We concur and believe that along with Hong Kong and Zurich, Singapore is one of the safest places in the world to store bullion.
In terms of government, Singapore is ranked 4th in the world and 1st in Asia for having the least corruption in its economy. Singapore is ranked the most transparent country in the world.
In terms of economic performance, Singapore is ranked No. 2 worldwide as the city with the best investment potential for 15 consecutive years. Singapore is the world leader in foreign trade and investment.
In terms of business competitiveness, legislation and efficiency, Singapore is ranked the most competitive country in the world. Singapore is ranked No. 1 for having the most open economy for international trade and investment.
Singapore is one of the world's easiest place to do business and may have the best business environment in Asia Pacific and worldwide. Singapore is Asia's most "network ready" country.
Singapore is first in the world for having the best protection of intellectual property and is the least bureaucratic place for doing business in Asia and possibly the world.
Dr. Faber prudently advises clients not only to diversify among asset classes but to also to diversify within asset classes. We share this view. We advise our clients to hold gold in various locations and in various forms but always in secure vaults and safe jurisdictions such as Singapore or Switzerland.
Access Essential Guide to Storing Gold in Singapore Here
MARKET UPDATE
Today’s AM fix was USD 1,145.00, EUR 923.39 and GBP 723.17 per ounce.
Yesterday’s AM fix was USD 1,144.50, EUR 914.94 and GBP 717.11 per ounce.
Gold rose $1.10 or 0.% to $1,143.50 per ounce yesterday and silver climbed $0.17 or 1.11% at $15.45 per ounce. Gold fell another 2.3% in dollar terms this week but its losses in euro and pound terms were more muted and it was down less than 0.8% in euro terms and by a similar amount in pounds.
Gold in Euros - 5 Days (Thomson Reuters)
Importantly, for European buyers, gold has remained quite robust in euro and indeed sterling terms (see charts) and seen only slight falls in recent days. Gold in euros remains up 5.5% for the year so far. Given the problems in the eurozone - it looks very well supported above the €900 level.
Gold in Singapore ticked marginally lower until just before London opened prices popped about $10, on high volumes of about 1,000,000 ounces. By late morning in London, prices had eked out small gains but futures trading volumes were double the average for the past 100 days for this time of day.
Most traders are on the sidelines ahead of the U.S. non farm payrolls number. U.S. employers are expected to add some 235,000 jobs in October. A weak number would trigger a strong rally in gold due to short covering and safe haven buying.
Gold in Euros - Year to Date 2014 (Thomson Reuters)
Gold is headed for another weekly drop, as the dollar headed for its biggest weekly gain in more than 16 months. The dollar index was little changed today but is set for a weekly advance of 1.5%, the most since the period ended June 21, 2013.
Silver traded near the lowest since 2010. Silver for immediate delivery fell 0.6% to $15.43 an ounce and is down 4% this week.
Platinum rose to $1,201 an ounce or 0.35% but is still headed for a 3% retreat this week. Palladium rose 0.6 percent to $756 an ounce and is set for a weekly loss of 4.4 percent.
Bullion prices have fallen as the Federal Reserve threatens to increase interest rates and despite central banks in Europe and Japan easing monetary policy to boost growth. Gold has fallen despite the very uncertain geopolitical situation and the real threat of terrorism and war as tensions with Russia deepen.
The Swiss gold initiative at the end of this month is also another bullish factor and it is surprising that gold has moved lower given the outcome will be close, and the yes side has a good chance of getting it passed.
Gold in Pounds - 5 Days (Thomson Reuters)
Physical investors in the US, Europe and Asia have taken advantage of lower prices this week.
The US Mint sold 30,500 ounces of gold coins in November so far. This is half the average monthly total since August. October sales were the most since January. The Mint ran out of American Eagle silver coins after selling 1.26 million ounces since the start of the month.
Holdings in the SPDR Gold Trust, the biggest gold ETP, contracted to 732.83 tons yesterday, shrinking for a third day to the lowest level since September 2008. Gold continues to flow from weak hands in the West to strong hands in the East.
Goldman Sachs forecasts a drop to $1,050 by year-end. As ever, their predictions should be taken with a pinch of salt.
Gold is very oversold and it’s 14-day relative-strength index is at just 22.9 today. For six consecutive sessions it has held below 30, suggesting that it may be a bounce.
After their recent falls, gold and silver are great value today versus stocks and bonds. The smart money accumulates on dips and buys low to sell high and is using this latest dip to acquire bullion on the cheap. Both precious metals may go lower in the short term and $1,000/oz and $10/oz are possible. However, those taking a long view and buying for 3, 5 and 10 years will again be handsomely rewarded.
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