‘Dr. Doom’ says Gold could test $1,400 to $1,500

May 4, 2012 at 17:08


“Dr. Doom” is feeling some pain about gold. Marc Faber, publisher of “The Gloom Boom & Doom Report,” said gold prices could test the $1,400- to $1,500-an-ounce level sooner than not.

“Gold may not perform very well in the near future,” Faber said, venturing that the price “probably overshot” when it topped $1,900 last August. “The gold market has performed so well,” he said, “we could have some setback.”
But Faber added that the doctor is “in” when it comes to his gloomy outlook for U.S. stocks and sovereign debt.

U.S. stocks, Faber said, “may correct more than what people expect.” Market leadership is narrowing, as happens in poor quality, mature rallies, he noted.

A 20% downturn for the U.S. market in coming months wouldn’t be surprising, Faber said.

“Someone very bullish about stocks should be very concerned,” he said.

The Hong Kong-based money manager doesn’t invest in U.S. stocks directly. He said his personal portfolio earmarks about 25% to Singapore, Malaysia, Thailand and Hong Kong stocks, including gold and property shares, 25% to corporate bonds from Russia, Venezuela, Asia and Europe, 25% to real estate and 25% to physical gold and other precious metals.

“We don’t know exactly how the end game will be played,” he noted. “That’s why I’m diversified.”

Faber was interviewed late Thursday in Carlsbad, Calif., where on Friday he is slated to address a conference of hedge-fund investors and money managers.

They’ll hear Faber’s deepening concern about developed nations’ costly commitments to their aging populaces, who “will vote for their benefits,” he said, at the expense of their children and grandchildren. In Faber’s view, paying for Social Security, Medicare and other obligations will saddle future generations with higher taxes and lower living standards.

As for euro-zone debt crisis, Faber is in the austerity camp. “The best way to deal with it is to take the necessary write-offs,” he said – on the order of a 90% haircut for Greek bondholders and perhaps 70% for Spain’s creditors.

While that would be painful medicine, to be sure, it’s a consequence, Faber said, of the “distortions and misallocation of capital” that now plague the financial system – i.e. overspending and lending to subpar borrowers for suboptimal uses.