Marc Faber Is Urging Investors to Turn to Gold
You’ve heard of geopolitical risks. Trump won the election, promising to reduce America’s exposure to international risks. Instead, from Syria to Afghanistan and North Korea, not to mention Russia and Iran, geopolitics are dominating. Trump has sacrificed the domestic file to focus on foreign policy and military adventures. Such is the context behind March Faber’s—aka Dr. Doom’s—prediction for gold.
The famous Swiss economist and investor knows a thing or two about gold. He understands the conditions that make its price rise. Marc Faber’s net worth is in the millions, many of which he made making the right calls on commodities. He understands risks and how to invest around them better than most. No wonder he edits a publication named the Gloom, Boom and Doom Report.
Marc Faber’s predictions have been especially successful in the 2000s. Some of his predictions include his expectations for the prices of such resources as oil, precious metals, and other mineral commodities, as well as China, as documented in his book Tomorrow’s Gold: Asia’s Age of Discovery. Therefore, it should come as no surprise that as worldwide turmoil persists—with no end in sight—Faber recommends investing in gold as the antidote.
Also Read: Gold Price Forecast 2017
The gold price chart certainly gives Marc Faber credit. The precious metal has been rising steadily in the past few weeks as more investors decide to pull out of the markets before the inevitable financial storm hits Wall Street. Indeed, the gold price forecast hasn’t been this bullish since Trump’s election.
Chart courtesy of StockCharts.com
The floor price for gold that everyone wants to see is $1,300 per ounce. Gold has not traded in the $1,300s since Trump was elected last November. The possibility of Trump being elected scared investors to hedge their risks, buying gold. The bullish market response, resulting from promises of unprecedented tax breaks and infrastructure spending, pushed stocks up. But, the bullish trend on Wall Street left gold prices in a kind of limbo.
The tables have turned. Economic growth has not met expectations. So much so that the Federal Reserve is afraid to follow its own prescription of lifting the nominal interest rate again in 2017. Fed Chair Janet Yellen has suggested there’s little consensus for another rate hike. (Source: “Central Bank Split Over Fate of Rate Hike,” CNBC, August 16, 2017.)
The Fed will confirm the rate decision in September. But, the sentiment seems to be favoring the idea that any rate hikes will wait until December. This hints that the gold price forecast could get an additional boost this fall. But, Marc Faber expects Trump’s agenda of few specifics and many generalities to create a climate of intense uncertainty.
Thus, Faber doesn’t simply recommend gold; he wants you to buy physical gold. (Source: “Marc Faber: In the Age of Cyber-Terrorism, Every Investor Must Own Gold, Hard Assets Alliance,” August 17, 2017.) Simply, Faber thinks the Trump agenda will hurt the markets. Moreover, it will raise all risks, including cyber risks. In other words, investors should not trust electronic records of their holdings. Rather, they should be able to touch and see them to feel more secure.
Marc Faber: Why You Should Own Physical Gold
Marc Faber delivers clear and unequivocal warnings. He urges Americans in particular to own physical gold rather than gold certificates or related banking instruments. Yes, Faber wants you to buy actual gold ingots or jewelry that you can touch and personally put in your own safe. Why Americans specifically? Because, Trump is putting America on a collision course with many powers. Most have no way of inflicting heavy damage upon the United States.
But a country like North Korea or Iran—and of course China or Russia—could deliver a cyber attack that cripples key infrastructure like the power supply, banks, or the Internet. If the lights go out, if millions of people can’t get online to check if their investment and banking accounts are still OK—Bitcoin and other blockchain variants included—nothing can beat an actual hard asset like gold. Rather than expose their investments to all manners of risk, from market fluctuations to cyber attacks, it’s best for investors to hold actual value. Gold clearly fits the bill because it’s an irreplaceable means of exchange.
Faber himself owns physical gold. After diversifying his money investments into bonds, shares, and real estate until the 1980s, he realized in the 1990s that it would be better to own valuable assets that have “meaning” outside the purview of the banking system and are not connected with financial investments.
As most central banks in the leading economies are keeping interest rates low, gold is an insurance policy against the overall rising cost of living. The global economy has been recovering slowly, remaining fragile. Meanwhile, rising levels of unsecured debt—subprime mortgages in the mid-2000s, and subprime car loans and mounting student debt now—are a constant reminder that financial collapse is behind the corner.
Thus, it’s best to diversify your investment strategy, which has room for physical gold. That way, in case of a financial crash—and the chances of one are increasing every day—instead of losing all of your savings, you might lose only a part of it.
Now, many might be wondering: How quickly are gold prices going to rise? Faber has no answer for that. Presumably, the financial markets have enjoyed such an intense bull run because investors have been feeding them, possibly shifting from gold and other metals to stocks or cyber currencies.
Faber prefers physical gold. Gold or gold coins, after all, can be exchanged for goods and services even when the power is out due to a cyberattack and your bank card fails. Sure, cash also works in that situation. But, cash doesn’t appreciate unless it’s held in a bank. Gold doesn’t even need a safe to appreciate. It can do so in the comfort of your pocket.