Marc Faber on the Gold Price

In early morning trading in Europe today, publisher of the Gloom Boom Doom Report Marc Faber gave CNBC his latest take on a plunging gold market.

“We overshot on the upside when we went over $1,900,” he told CNBC’s Steve Sedgwick.

“We’re now close to bottoming at $1,500, and if that doesn’t hold it could bottom to between $1,100-1,200.”

So far, spot on, as Faber’s call for gold to fall to $1,500-1,600 at a conference in Mumbai a little more than a week ago has materialized.  Faber said he holds 25% of his portfolio in gold.

Spot gold traded as low as $1,536 in Asia, Monday.  With less than two hours before the open in NY, gold is $100 off its low to trade at $1,636.  Silver, too, is up more than 10% off its low of $26.05.

Faber’s next level of support, between $1,100 and 1,200, coincides with gold’s 60-month moving average—and level that could be tested if the global financial crisis turns profoundly more ugly than the already terrible expectations implied by the colossal move into U.S. dollars and out of emerging market currencies during the past two weeks.

The Brazil real and Mexican peso, for example, have gotten clobbered since mid-September, registering staggering 22 and 16% total declines against the dollar in the past 5-6 weeks.

Though not nearly as dramatic, Asian currencies, too, have been hit with 6% to 10% declines against the dollar during the same time period.

Currencies guru John Taylor of FX Concepts nailed that prediction in July, when he told Bloomberg that the dollar was primed for a very strong rally against emerging markets currencies in the fall season.

Incidentally, Taylor also predicted in July that gold would reach $1,900 per ounce.  Then, he said, the yellow metal would crash to Faber’s most recent pessimistic call of approximately $1,000 mark before gold resumes its bull market ways.

However, for now, Faber suggests the bounce in gold may begin as early as Wednesday.  And, at that time, he may turn into a buyer again.

“Both equity markets and gold markets have become very oversold,” he said, “and I think a rebound is occurring.”

Unlike many analysts, who point to Greece as the catalyst for the sell off in every asset except U.S. Treasuries, Faber thinks heightened fears of a meaningful slowdown in China could be behind the global mass exodus out of assets associated with the Asia growth story.

China, he believes, has “overcapacities” in some areas of its economy, which were brought about, partially, by Beijing’s rapidly increased capital spending programs following the collapse of Lehman Brother on Sept. 15, 2008.

“Asian markets are weak, Asian currencies are weak and economically sensitive stocks are weak because there’s a more meaningful slowdown in China,” he said.

“You have a capital goods level where capital spending increases dramatically and companies keep spending to a high level, but because of the acceleration, it can lead to recession simply by the economy growing at a steady rate, and I think we are at this point in China.”

Though, Faber didn’t say so, specifically, during the CNBC interview, he may be looking to the industrial metals price action for clues to where gold, in the short term, would go from here.

James Turk: just “several more days of silver in the 30s”

With silver and gold rallying strongly against the tide of the risk-off trade, bullion expert James Turk forecasts that silver is about to launch into the 40s, as more nervous investors come to terms with the inevitability of further devaluations and/or sovereign defaults, forced upon the world’s central banks by investors and weak politicians.

“One never knows exactly how the markets will unfold, but my sense is that we only have several more days of silver in the 30s,” Turk told King World News. “Once silver clears $38 on a closing basis, you are going to get back into the mid 40s in a heartbeat.”

Turk, the founder and president of overseas precious metals storage firm Goldmoney.com has warned long ago of the events playing out in Europe today, so his words carry significant weight among the bullion community.  The timing of his call back in January for silver to reach $50 by June 30 was considered reckless and daring at the time.  But history has proved him correct.  Silver reached an intraday high of $49.70 on May 2, just pennies shy of $50 and a month sooner than he expected.

Recently, Turk (along with another PM giant, Jim Sinclair) has differed with another hard-money advocate, Marc Faber, on the direction of precious metals prices during the months of July and August.  Faber expects the precious metals to meander in the hot summer months, which is a bet that the long-standing historical record of weakness during that time is most likely.  On the other hand, Turk anticipates a repeat of 1982, the year of the Mexican peso devaluations.

“The action in gold and silver so far this summer indicates to me that this is in fact poised to be explosive on the upside,” Turk explaind.  “Nobody is talking about this, but it could be a reality in short order.  Here it is nearly 30 years after the breathtaking summer of 1982, and history is about to repeat all over again.”

Turk’s battle with Marc Faber in the fight to be right on the outcome of precious metals during the summer months favors Turk, at the moment.

Gold and silver took center stage during the flurry of bullion-friendly news coming from both sides of the Atlantic, yesterday.  The timing of the news releases from both sides of the Atlantic seemed contrived, timed and salvo-like, as the dollar and euro battle it out in the race to cut sovereign debt loads through currency devaluations.  Gold reached new highs in the euro and new closing high in dollars.  Overall, gold was the winner in the scramble out of euros.

Tuesday’s news of widening spreads between the German and Italian 10-year notes, as well as soaring CDS pricing of Italian debt; an IMF warning launched by the new French (but Ameri-centric) chief, Christine Lagarde, at Italy, chiding the Italians for dragging its feet on implementing its own austerity plan; Moody’s downgrading Ireland to junk; FOMC minutes release, which strongly hints at the possibility of further stimulus from the Fed is coming; the posturing war that’s broken out between Democrats and Republicans over the U.S. federal budget; and the timely strengthening of the Japanese yen to save the day from a dollar breakout of 76 on the USDX have demonstrated the desperation among the officialdom and the equally fearful investor who searches for a truly safe haven.

“Eric this is the start of the next big leg higher in the precious metals,” suggested Turk.  “We’re at a new record closing high in gold today, that is extraordinary considering it is happening against the headwind of a stronger dollar.  There is an important message here, Eric, money fleeing the Euro is not just going to the dollar, it’s flowing into the metal of kings.”

As the public enjoys summertime vacations and respite from the daily slew of bad economic and political news, Turk sees the investor public mostly unaware of the theft of purchasing power currently in progress.  But for the precious metals stalwarts and recent converts, this summer could be a very profitable one.

“People are recognizing that the only true safe haven is the precious metals,” said Turk.  “There are still so few people talking about gold and silver having an explosive summer.  The only place I’ve heard it is on KWN.  The fact that there is still so little bullish sentiment just reconfirms my view that gold and silver are ready to rocket higher.”

It will be mighty interesting to see if silver does indeed exceed $38, and if an assault on the May 2 high is in store for the silver faithfuls.

3 Gold Stocks to Watch: AngloGold Ashanti (NYSE: AU), Goldcorp Inc. (NYSE: GG), Kinross Gold Corp. (NYSE: KGC)

3 Silver Stocks to Watch: Silver Wheaton (NYSE: SLW), Coeur d’Alene (NYSE: CDE), Helca Mining (NYSE: HL)