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.

Marc Faber: Gold “probably cheaper than when it was $300”

As the debate moves from how high the gold price can go to whether the precious metal has become too expensive at $1,830, Marc Faber, editor of the Gloom Boom Doom Report, said the ultimate world’s reserve currency is “dirt cheap.”

Speaking with Newsmax’s, the eclectic Swiss money manager, who has called Thailand his home for more than 20 years, believes the gold price should be put into a context of its relative value against rapid devaluations of the world’s primary reserve currencies—the U.S. dollar, euro, yen, and British pound—and, now, the Swiss franc, following the SNB decision last week to peg the franc to the declining euro.

“In fact, I could make an analysis to show that the price of gold today is probably cheaper than when it was $300 per ounce based on the increase in government debt, based on the increase in monetary base in the United States and based on the expansion of wealth in Asia,” Faber explained.

Spot gold reached a high of $1,923.70 per ounce on September 6, whose price has since pulled back to the $1,800-$1,850 trading range following the SNB announcement that the franc, de facto, will no longer become a refuge of the currency.

Nearly 18 months earlier on April 26, 2010, Faber told Newsmax he won’t give up his gold as long as the stewards of the U.S. dollar remain in power—as gold’s price in terms of dollars should increase commensurate with its rate of debasement, which, he said, has been at an alarmingly high rate since the collapse of Lehman Brothers in September 2008.

“I own my gold and I will never sell it, especially when I see clowns like Ben Bernanke, Larry Summers, Tim Geithner,” Faber had said.  At the time of that interview, gold closed at $1,151.10 on the COMEX, a 59% rise to today’s price of $1,830.

Today, Faber remains very cautious, recommending to his clients and followers to hedge bets on the outcome of what he calls a “failed Keynesian policy” among governments and central bankers worldwide.  On many previous interviews around the world, he has stated he speculates that U.S. equities have topped this year, emerging markets appear vulnerable to a shock, and U.S. bonds remain in a massive bubble that someday will “end badly.”

How badly?

On Feb. 27, 2011, Faber conducted an interview with Colorado-based precious metals dealer McAlvany Financial Group, and said, “I think we are all doomed. I think what will happen is that we are in the midst of a kind of a crack-up boom [a term coined by famed Austrian economist Ludwig von Mises] that is not sustainable, that eventually the economy will deteriorate, that there will be more money-printing, and then you have inflation, and a poor economy, an extreme form of stagflation, and, eventually, in that situation, countries go to war, and, as a whole, derivatives, the market, and everything will collapse, and like a computer when it crashes, you will have to reboot it.”

Gold Shorts to soar Gold Price, says James Turk

After a slew of positive gold news of the past two weeks, James Turk weighed in on his latest thoughts with King World News (KWN) yesterday, and reiterated his forecast for a golden summer rally led by the unrelenting Asian buyers.

“It is very important that demand in Asia for physical metal has reappeared,” said Turk in the KWN interview.  “I continue to be amazed how the Asian buying adjust so quickly to the rising gold price.”

As the never-ending crisis in Europe, and now, the U.S., dominate mainstream news, more and more nervous investors waiting for cheaper gold prices find the strain of watching gold slip away to new record highs in all major currencies increasingly too much to bear.

“Clearly people are worried about the train leaving the station without them, so demand for physical metal adjusts quickly to the reality of higher prices,” Turk told KWN.  “After all, what would you rather own – gold or the dollar?”  Or the euro?

The effects of QE2 have already slammed the purchasing power of the Chinese, Vietnamese, Indians, Koreans, Thais, as well as most of the rest of Southeast Asia.  And as the shockingly poor data on U.S. jobs, GDP, manufacturing, housing, personal income, consumer sentiment and stubbornly high food and energy costs, show no signs of turning around, Asia investors fear yet another round of money printing by the Fed will send another inflation shock wave their way, knowing, too, that the full effects of QE2 have yet to come.

International bullion dealer, GoldCore, recently wrote, “South Korea’s central bank bought 25 tonnes of gold over the past two months . . . a 17 fold increase in their gold reserves. . . . Thailand’s gold reserves rose by 15.5% in the two months and rose to about 4.07 million ounces in June, from about 3.523 million ounces in May, according to figures on the Bank of Thailand’s Web site.”

All of that sudden buying out of Asia, on top of the already rapidly increasing rates of gold purchases from China and India, has the gold shorts (commercials) on the ropes, according to Turk.

“You have to remember, Eric, that the commercials have a massive short position in gold that is severely underwater,” he said.  “What the commercials try to do is trade for short-term gains while the longer-term positions go against them as gold climbs relentlessly higher.  They have this done for over 10 years, so this is nothing new to them.  What they (the commercials) fear is the strong physical buying coming out of Asia because they are powerless to fight that tidal wave.”

Midway in Play: Gold Penny Stock worth Tracking

As gold asserts its role as money amid the battle across the Atlantic, for which currency is more flawed, early birds to the coming explosion in gold penny stocks may find themselves as the new millionaires in the coming years.

It might be wise to begin the due diligence process and add the very best prospects to your portfolio, keeping in mind that these stocks are high risk.  But when the juniors start to fly, there’s no higher high than a gold rush.

Because the choice of hundreds of gold pennies is difficult to narrow down to, say, five to ten stocks to watch, a competent analysis who’s done his homework may be good place to start.  And one analyst who’s reputation is among the highest on the Street, Louis Navalier, already published his picks on March 31.

After researching the performance of his six picks, four of the six stocks have traced a similar path to the gold junior mining index (GDXJ).  One of Navalier’s stock picks truly stands out as an explorer that’s gaining the Big Mo, Midway Gold Corp. (AMEX: MDW).

Exploration-stage company Midway Gold stock has skyrocketed to 175% gains year-to-date, and a monstrous 463%, year-over-year.  The stock currently trades at $2.31, well above its 13-week and 52-week moving averages of $1.96 and $1.28, respectively.

Midway’s properties, located in Nevada and Montana, include the Midway, Spring Valley, Pan, Gold Rock and Golden Eagle.  Of the five properties, the Pan, located at the northern end of the Pancake mountain range in western Nevada, approximately 22 miles southeast of Eureka, has been where the action is, as the company has to date reported drill results of 21 holes, some results were so-so, some pretty good, and a couple of drills flew off the charts.

The latest drill result, the most impressive of them all, was reported on June 13, popping the stock 7.4% to $1.87 from the previous trading day close of $1.74 as well as triggering a 32% rally to day’s $2.31 print.

“Drill hole PN11-09 contained the longest and highest grade gold intercept yet encountered at its 100% controlled Pan Project, White Pine County, Nevada,” the company stated in the June 13 news release.  “This 30 meter intercept of 3.15 grams per tonne (gpt) gold includes a zone of 13.7 meters of 5.79 gpt gold which also includes a 1.5 meter interval of 10.1 gpt gold.”

And, two weeks later, on July 27, MDW announced that it has been added to the Russell 3000 Index.  Initially, the stock sold off a bit after the run up on the 24th, the day MDW was added to the Russell 3000.  Then it traded sideways for a couple of weeks before rallying as high as $2.89 on July 18.  The stock has since succumbed to profit-taking back down to the $2.30 level.

According to yahoo Finance, MDW has attracted 16 institutions.  Two investors hold more than $35 million worth of shares, of which, half of 15.5 million shares held by the two investors was recently been purchased by Hayward Securities.

Spectacular Short-squeeze in Silver Price coming, says James Turk

Our friends at King World News recently posted two interviews from two blue-chip sources, who report the possibility of an imminent and massive short covering by the government-supported cartel in the gold and silver markets.

As the premiere Web site for breaking interviews from the best informed in the gold and silver market, Eric King’s King World News (KWN) has been atop the drama and inside ball in the metals as it breaks.

James Turk, a frequent guest of KWN, as well as the founder and president of Goldmoney, got word (confirmed by the KWN’s anonymous London trader) of a massive short squeeze potential developing.  If gold and silver were to achieve prices north of $1,600 and $40, respectively, and hold above these benchmarks for a day, or two, many of the oversized number of short contracts will have to cover to cut losses from the adverse move higher—a move, said Turk, that could rival the monster rally of August through April.

“I wouldn’t be surprised to see $2,000 (gold) very quickly,” Turk speculated  in his KWN interview.  “It’s just a question of how the European bank crisis unfolds or the U.S. debt limit unfolds or any one of these number of trouble spots around the world unfolds. Any one of those could light a fire under the gold market and you could see $2,000 very, very quickly.  You could also see silver over $50 very quickly.”

Brief panic set in the Italian 10-year note at the close of trading in Asia today, which culminated in a sell off in the 10-year to above a 6% yield.  Last time Italy’s 10-year reached the 6% handle, an emergency gathering of Italy’s upper legislative body was assembled to vote on Finance Minister Giulio Tremonti’s austerity package to ward off a Greece-like run on its sovereign debt.  The passage of Tremonti’s plan occurred last week, briefly triggering a rally in the 10-year.

But here we are again at the precipice of another sovereign debt collapse, in no less than a week’s time from the last threat.  As the EU fights the bond vigilantes of Italian debt, the gold price correlated strongly with the yield on the 10-year following the NY close.

As the 10-year punched through 6%, gold and silver surged to intraday highs of 1,609.92 and $40.85, respectively.  But as buyers (central banks?) aggressively bought the notes above 6%, the yield fell back to 5.72%, taking down gold and silver to the $1,600 and $40.15 levels, respectively.

All of that comes on top of a PM market already tight from the escalating buying since the aftermath of the March 2009 meltdown.

“Because the market is so tight still, any kind of huge buying of physical metal is going to send these prices much higher,” added Turk.  “Then if you add in what the London Trader is talking about, short-covering coming in, it’s got the potential for an upside explosion.”

And to add another pinch of drama to the ongoing bullish story for silver, Reuters reported Monday the Hong Kong Mercantile Exchange is set to launch a silver futures contract on Friday, in the hopes of tapping into the “growing demand for the metal in China.”

The contracts will trade in lots of 1,000 ounces, as apposed to the 5,000-ounce contracts traded on the Chicago Mercantile Exchange.

Eclipsing a 17% increase in global demand for silver, China’s 67% rise in demand for the gray metal will enable Chinese investors an additional market to trade 2011′s hottest metal without falling prey to rapid-fire CME margin hikes and other maneuvers to protect the JP Morgan-HSBC price suppression scheme.

“The new contract will enable buyers and sellers in China to trade effectively with their counterparts across the world, while at the same time, allowing investors to gain exposure to silver price movements and broaden their investment portfolio,” said HKMEx president Albert Helmig in a statement.

Some analyst say the HKME is another nail in the coffin of the Anglo-American monopoly of the silver market, and that the HKME’s extended hours session will pose an additional problem for the manipulators of the silver price at customary 10 a.m. attack.

Though, typically a seasonally slow period for the precious metals market, this summer has been anything but slow.  Turk believes a perfect storm is on the horizon, and expects moves in gold and silver to rival the 1982 blastoff in the metals during the Mexican debt crisis.  Gold soared approximately 50% during that summer.

And if the previous 177% run in silver during the 25%  rally in gold between August and late April is any indication of things to come for silver, a blow up of the shorts could trigger another breathtaking rally in silver.  A similar move to the last silver rally calculates to $100 silver.

“People are looking for the safety of gold and exiting national currencies,” Turk said. “Exiting the dollar, exiting the euro, exiting the British pound, gold is at record highs against all three of those currencies.”

“It’s all very positive Eric, it’s still within my bigger point of view that the summer is going to be spectacular.”

$100 Silver in 6 Months, says $9B Sprott Asset Management

Here we go again.  Silver is on the move in chunks of up to 7% moves to the upside, yesterday, and as high as another 3.4% in European trading this morning.  Silver reached a peak of $39.36 before JP Morgan’s earnings report brought in some sellers at 8 a.m.

Sprott Asset Management’s John Embry told King World News he believes that when the investing public comes into the precious metals market, in earnest, the price of silver could go hyperbolic.  While the silver market is razor thin to begin with, adding the effect of the largest concentrated short positions in history will explode the price of silver, according to Embry.

“I totally agree with James Turk.  I think the thing (silver) has been abused on the downside and it’s just like a coiled spring ready to explode,” he said.  “I think silver will go back to those highs we saw before that May raid faster than most people can imagine.”

Unlike other beloved hard-money advocates Jim Rogers and Marc Faber, Embry is as fearless as James Turk and Jim Sinclair when he’s asked to put a price tag on the mercurial gray metal.

“We haven’t even really seen money start to significantly flow into hard assets, when that occurs and it will occur, it’s going to have an outsized impact on the price of these things,” explained Embry.  “The gold price should be $2,000 within the next six months and I believe the gold/silver ratio will decline tremendously in that environment.  I have no problem with $100 silver, none, and that might just be jacks for openers.”

The implications of Embry’s suggestion of a 20 to 1 ratio between the prices of gold and silver appear, on its face, extraordinary or apocalyptic.  A move of 25% in gold that sparks a 150% in silver may be hard to take in for newcomers to the bullion market.  But let’s consider the last gold and silver rally.

In August 2010, gold and silver traded at approximately $1,150 and $18, respectively.  Eight months later, in late April 2011, gold reached $1,575 and silver spiked to nearly $50—a 37% and 175% moonshot, respectively, in the price moves of gold and silver.

As gold knocks on the door at $1,600, and for silver, at $40, a move of 25% in gold to $2,000 and another blast of 150% to $100 for the price of silver isn’t that crazy—it’s an aggressive call, but not a crazy one at all!

Embry cites an important point of leverage as an explanation for his enthusiasm  for silver.  Several competent analysts have worked the numbers (including Bill Murphy and Chris Powell of GATA), and have come to the conclusion that for every ounce of silver in known inventories there are approximately 100 paper contracts trading (a fractional bullion system, if you will) on various exchanges across the globe.

To put the ratio between the paper and physical silver market in better prospective, a 1 percent silver “reserve” betters Lehman Brothers’ ridiculously low (criminally low, some say) reserve of 1.6% just prior to its implosion.  It just took one hint of a breakdown in confidence in Lehman that took it down so quickly—through its use of the over-the-counter derivatives market.  The same scenario could play out at the Comex, according to Embry.

“What’s been fascinating, and what was unappreciated by me in the early stages, was the enormous number of derivatives that have been created in the financial system,” said Embry.  “Because of the derivatives they’ve been able to keep this thing going for infinitely longer than any rational mind would have thought possible.

“Because the balloon was blown up so much, I just think the aftermath in its finale is going to be extraordinarily unpleasant.”

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 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)