'Buy some gold every month' as protection against falling currencies, says Marc Faber
Source: BI-ME , Author: BI-ME staff
Posted: Fri March 5, 2010 2:40 pm

INTERNATIONAL. Marc Faber the Swiss fund manager and Gloom Boom & Doom editor said gold prices will continue to rise in value against all depreciating paper currencies,

As gold's supply can't be increased at the same rate as you can print money, Faber recommends everybody should buy some gold every month "forever".

Speaking in an interview with India's CNBC-TV18, Faber said: "I don’t think the dollar will make a new low against the euro. The dollar bottomed out at 1.51 against the euro".

"Since November we had a correction in gold prices which bottomed out at US$1,045 per ounce on February 5. "The dollar and the euro have been weak against gold. We are now at US$ 1,138 per ounce," said Faber, adding that against gold "all paper currencies will continue to depreciate over time".

We had a very powerful rebound in US Dollar not against the Asian currencies but against the euro and against the Pound sterling

Faber expects the dollar to remain firm against, especially the pound sterling and the euro.

"The euro has been very weak against the US Dollar. Since November 25, we have gone down from 1.51 to 1.34. We are at 1.36 and we can rebound to around 1.40 before going lower. In general, the euro will weaken further against the US dollar not that there is anything good about the US Dollar, it is just that at the moment it is less bad," he told CNBC-TV18.

In an interview with the Financial Times in Hong Kong last month, Faber said:  "All paper currencies will continue to lose their purchasing power as they have over the last 100 years or so".

"I suggest that people accumulate gold. They shouldn't market-time the gold price, because we're going to have volatility...But I will not sell my gold, not for as long as [the current US administration] is structuring fiscal, monetary and foreign policies.

"In the US, I don't think we will have real [positive] interest rates at any time in the next 10 years."

Gold offers wealth protection

Speaking in a CNBC interview Thursday, Faber summarised his stance on gold by saying: "Everybody should buy some gold every month forever".

Explaining his  bullish stance, the famed investor said: "Gold is not a liability of someone else, you really own it, you keep it in a safe deposit box, its quantity can not be increased at the same rate as you can print money which will eventually again weaken the US dollar. I am not saying that the dollar will go straight down, but eventually the purchasing power of money will lose."

“I’m not saying that the dollar will go straight away down because other currencies apparently like the euro are even worse than the U.S. dollar at the present time,” he added.

Buy EM Equities

Clarifying his stance on equities, Faber said: “ Eventually if you print money, the purchasing power of money will lose [value] and what will happen is stocks will adjust on the upside..if you believe in equities, I would rather buy Vietnamese shares than US shares because I can make the case that the economy there will grow much faster than in the United States, from a much lower levels admittedly”.

“Or I would buy Indian, Chinese, Malaysian shares. I think if you want to be in the US stock they are better alternative than US stocks,” he added.

Greece plan won't work

Answering a question on Greece, Fabers said the South European country will be bailed out indirectly by the ECB, but the plan won’t succeed.

"I don't think it will work out, and I think other countries like Spain and probably Portugal (and Italy) will then also have to be bailed out eventually, and it will lead to more monetization in Europe, one of the reason the euro has been so week...

The pain of the austerity will be very, very burdensome on Greece, and eventually the economy can not grow with the kind of budget they will have to enact, and under these conditions their currency is way overvalued (they are in the euro). And so without the ability to grow, their ability to pay the interest and repay the debt will actually diminish...."

Great Depression II?

In a reply to a question by CNBC on the US and other countries having always been able to dig a way out their own troubles and why he thought this time was different, Faber pointed out that in the 1930s we did not have the credit card and the US government did not have liabilities such as Medicare and Social Securities. The interest payment will grow the 20, 30 or even 50% of the federal budget over the next decades. 


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