Noted global economic analyst and investor Marc Faber says gold is the best investment among commodities and there is no harm in investors amassing the yellow metal even at these high prices.
In his latest June outlook on the global economy, Faber asked investors to stay away from industrial commodities. "Global growth is slowing, which means weaker demand and lower prices for industrial commodities," he said.
Faber who publishes the widely circulated Gloom, Boom, and Doom Report said that he still likes gold and recommends a gradual accumulation despite market fluctuations.
He said that longer-term gold can only go higher because of negative real interest rates. Even a deflationary collapse is unlikely to hurt gold because the Fed will simply debase the dollar to get nominal prices higher.
"If the Fed gets it right and successfully re-inflates asset prices, then inflation will be in the double-digits, which would be bullish for gold," Faber pointed out.
Faber predicted the top in the equity markets in Nov 2007 and caught the bottom in March 2009, making his subscribers a lot of money.
On the global stock market, Faber is still cautious on equities, believing that a more significant market correction is around the corner.
However, shorts should beware because they are fighting the Federal Reserve. If you have to be in the market, stick to consumer staples like MO, JNJ, KO, PG, etc. For the ultimate contrarian investor, take a look at some select housing stocks (TOL,LEN, KBH), but only if you have a high risk tolerance.
On bonds, Faber said he likes treasuries for a trade. He said taht 10 year yields could fall to 2.5% during a stock market correction. Longer-term Faber hates Treasuries and dismisses Albert Edwards call for sub 2% yields for the 10 year.
Faber said that it is very hard in this environment to predict what will happen in the markets. The Fed's manipulation of asset prices has caused large distortions. However, one thing is clear: the Fed will not let the markets fall too much.
This is why Faber thinks the stock market will trend higher (in nominal terms) or at least trade sideways for the forseeable future.
Source: Commodity online
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