Marc Faber: Why Gold Looks Better Than The S&P 500

March 07, 2014

HAI

Guru shares his views on the markets, including gold.


[This article originally appeared on Sprott’s Thoughts and is republished here by permission.]

 

Swiss-born and -educated Marc Faber’s distinct voice is a common sound on CNBC and Bloomberg TV when it comes to big-picture forecasting in investments. Publisher of the “Gloom, Boom & Doom Report,” and a director of Sprott Inc., here he shares his latest views on the markets.


Sprott Global: Marc, you live in Asia. What’s happening on the ground there and what does that mean for gold and natural resources?

Marc Faber: Well, that’s a very good question because we have an economic slowdown in emerging economies that is very pronounced.

I think some emerging economies may be submerging soon, and have significant economic problems. The question arises, Will they continue to buy gold? Say, if there were a recession in China—a downturn—would people buy gold?

I think if the Chinese economy imploded, it is likely that the currency, the yuan, would begin to weaken, or the government would devalue the yuan.

If that were the case, then I think that Chinese investors would shift some of their money into gold rather than keep their funds in the local currency.

So I think that a problem in Asia—and geopolitical problems in Asia and in other regions of the world—may lead to higher rather than lower gold demand.

Sprott Global: What are your thoughts on the regional Asian conflicts going forward, and how might that impact natural resources?

Faber: My view is this: We wouldn’t have a conflict in Asia if not for the intervention by the U.S. The U.S. has a security pact with Japan and has military bases and naval basis all over Asia.

The Chinese economy is highly vulnerable to interruptions in the supply of metals and of oil. Forty-seven percent of global metals consumption is from China. It’s up from 4 percent in 1990 and 10 percent in 2000. So they have become a huge factor.

For their industrial production, they need resources; they need iron ore from Australia, copper from Australia and elsewhere; and oil from the Middle East. That’s their only source of oil—the Middle East—compared to, say, the U.S., which can source oil from Canada, from Mexico and that has rising domestic production.

So the Chinese are very concerned about interruptions of supplies; I think that over time, the Chinese will want to control the East and South China Sea. I do not think they have any plans for aggression, but the U.S. wouldn’t be particularly happy either if, say, the Chinese or the Russians had military bases in the Caribbean, in Mexico, in Canada and so forth.

The Chinese cannot accept to be encircled by U.S. military bases in Central Asia, South East Asia and North Asia. I think those tensions will increase over time.

 

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