Marc Faber: “My Favorite Investment remains Gold”

As gold sells-off from a tremendous 29% run from the July 1 low of $1,478, Marc Faber, the editor and publisher of the Gloom Boom Doom Report, told Bloomberg’s Carol Massar and Matt Miller on Wednesday his “favorite investment” still remains gold.

The self-described “greatest bear on earth” reiterated his long-standing view that the Fed will print the U.S. dollar into oblivion in response to sickly economic data that continues to stream in from all sides of the U.S. economy and for as long as the eye can see.

What Fed Chairman Ben Bernanke will say at Jackson Hole on Friday is less relevant to his forecast for the markets, Faber suggested, as the Swiss money manager said the Fed has already embarked on QE3 after it issued a Fed policy statement at the close of the FOMC meeting on Aug. 9, strongly implying that the Fed sees no evidence of a strong-footed U.S. economy anytime soon.

“ . . . the Committee decided today to keep the target range for the federal funds rate at 0 to ¼% ,” according to the FOMC press release.  “The Committee currently anticipates that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.”

Immediately following the announcement, the Treasury market, Swiss franc and gold soared, culminating in a two-week follow-through rally in the 10-year Treasury, which saw its yield stunningly drop below 2%, the Swiss franc trade as high as $1.30, and gold spiking to $1,917.90.

Faber believes the rally in these three markets suggests that the effects of the FOMC statement have already begun to manifest themselves in all markets, leaving nothing meaningfully left for Bernanke to add to the FOMC policy statement.  QE3 is here.

Expect a dud from Bernanke at Jackson Hole, according to Faber.  In fact, the gold market may be selling off in anticipation of a “no news” meeting in Wyoming, as Treasuries, gold and the Swiss franc have already priced in quite a bit of QE3.

“I think what [Bernanke] will say is that they are monitoring the situation, and they will take ‘appropriate measures’ when they are required,” he said.  “To some extent we are in the midst of QE3 already, because by announcing the Fed will keep zero interest rates until the middle of 2013 . . .”

Though the same dire issues confronting Western economies (ergo, affecting Asia, too) have not gone away, leaving the Fed no options other than to continue printing money, according to previous Faber interviews.

In fact, according to many respected economists, the overhanging debt loads are heavier today than they were in 2008.  Faber has said on many occasions that he sees nothing but gloom for the equities and bond market for the foreseeable future, and expects that the Bernanke Fed intends to affect negative real interest rates for years to come in an effort to debase the U.S. dollar.  Savers and creditors will suffer during the process.  And, the U.S.-led wars will escalate, he said.

“All I am saying is I am very bearish. I think we will have inflation. I think the Treasury market is a disaster waiting to happen,” Faber declared.  “I think the economy will slow down. They’re going to print money and we will go to war at some stage somewhere.”

He added, “So, you are probably better off in equities than in bonds. My favorite investment remains gold. As it happens, the gold price is coming down, and I hope it will drop $100 or $200. Not necessarily a prediction. I think we will go down in a correction because there has been too much enthusiasm recently.”

Gold Market: Anonymous London Trader eyes $1,680

The anonymous London gold trader is back with King World News (KWN) to offer his latest thoughts perched with a bird’s-eye view of the gold market.

Confirming the report from Goldmoney’s James Turk, who said that the gold shorts have been under tremendous pressure to cover above $1,600, the anonymous London trader told KWN he sees a lot of shorts unwinding positions above the $1,680 level.  If the gold price can maintain a move above $1,680 at the close, the short squeeze will be on in earnest, according to the anonymous trader.

“The action is very positive,” the trader told Eric King.  “If there is a pit (Comex) close above $1,680, gold will race to $1,705 because of all of the buy stops above $1,680.  There are a tremendous number of shorts in the gold market and a significant number of them will capitulate and close out their shorts above that level.”

As early as two months ago, Goldmoney’s Turk issued the same warning to traders who are not positioned to ride the gold (and silver) market higher in the event of a short squeeze, which Turk said is very likely.

As today’s market action shows the Dow falling hard to 11,650, while gold advances to $1,678, the Dow-to-gold ratio has dropped below the important 7-1 level within the first 90 minutes of New York trading.  If the trend continues, it could indicate traders have lost faith in a U.S. recovery and the prospects of a profitable “risk-on” trade.

On that point, Marc Faber told CNBC on Tuesday that equities have kicked off a fresh bear market, while Barton Biggs, on the other hand, said that yesterday was the day to beginning buying equities for the next 7%-9% rally higher.

According to the London trader, the Faber thesis for the future trend in stocks will show up in the gold and silver market—if the gold price can be sustained above $1,680, and above $42 for silver.

The London trader continues, “The same guys who are shorting gold have been shorting silver.  And if we get the covering in gold above $1,680, silver should move $2.50 higher on short covering as well, which at that time should be roughly the $45 level.”

Moreover, the trader said the strong buyers, who typically accumulate at the best prices for the two precious metals during the seasonally soft summer period, have not yet bought, waiting instead for the pullback.  But, those buyers may have to chase prices higher, creating even more trouble for the shorts, which then may begin a virtuous cycle of higher prices, similar to the massive precious metals rally during the April run-up.

Adding to the drama in the gold market is tomorrow release of the U.S. jobs report.  Another horrendous report on top of June’s (released on the first Friday of July) nasty surprise could trigger the next wave of short covering, according to the London trader.

“The physical buyers in gold have not been chasing the market at this point,” the trader said.  “They have been waiting for their usual summer gift, and it hasn’t come.  Usually they are filled by now, so we are going to see those guys come in shortly, possibly after non-farm payrolls.  They (the physical buyers) have moved their levels way up now and they are going to start chasing price at some point.”

So far today, gold briefly pierced $1,680 to trade as high as $1,682.15 on the Comex before it was slapped back to $1,675.

“Remember, $1,680 is the key here,” the trader said.

Marc Faber: Bear Market is Starting

Here comes the bear market, Marc Faber, the editor and publisher of The Gloom Boom and Doom Report, told CNBC Europe Tuesday.

“The bear market is starting. When you compare equities to bonds and cash I don’t think equities are very positive,” said Faber.

Faber, who last month said the Dow had already reached its high for the year, cites the rallying bond market for his outlook for equities.

At the close of Tuesday’s trading, the 10-year Treasury reached 2.6%, and the 30-year cracked below 4% for the first time since the 700-point decline in the Dow of December 2008.

“The Treasury market is telling you that the economy is in recession,” said Faber. “So if the bond market is telling you that the economies of the Western world are weakening, but at the same time the stock market is still relatively high, I think the stock market is vulnerable.”

Faber’s usual castigation of politicians for the handling of the crisis also included a few mild snipes at analysts who predict a surprise rebound in the U.S. economy slated for the second half.

“The politicians are all useless individuals. Nobody is reducing the problems in the US or Europe, just putting on a band aid and postponing the problems endlessly,” he said.

“Some analysts think that there’s a chance economic data will surprise on the upside but I think, if anything, it will be on the downside,” Faber added.

He also expects corporate earnings and guidance will disappoint the Street.

But topping his list of lurking problems for the U.S. and Europe is not sovereign debt issues or corporate profits; it’s China.  Faber believes China is vulnerable to a slowdown from the nation’s largest buyers of its goods, which, he said, “is a much bigger risk for the global economy than the U.S. because the U.S. is no longer a major commodities buyer.”

If China’s industrial production slows, the bright spots in the global economy coming from resources-rich Australia and Canada as well as oil producers of the Middle East will fade as well, according to Faber.

“If commodity prices are falling, then commodity producers will buy fewer goods from China,” he pointed out. “This is something that the world central bankers can’t deal with.”

As far as the outlook for the euro, Faber didn’t expect the euro to survive, let alone to trade above 1.40 to the dollar.

“What surprises me more is actually the strength of the euro and that it has not collapsed yet,” he said, but believes that the PIIGS will eventually by “chucked out” if the euro is to maintain its present secondary reserve status to the dollar.

“I would have chucked out Greece three years ago, straight away, and it would have been much cheaper,” Faber said.

Faber has turned very bearish on equities, bonds, and currencies—in real terms—and recommends accumulating gold to weather the storm.  Personally, he will add to his own gold position if the price drops $150.