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.”