There are a couple investors, analysts, and trading legends that really have an insight into the gold market and are truly worth consideration when they give an interview. Posted by James Randolph on December 23, 2011
Marc Faber Sees Only the Gold Market
December 23, 2011 – There are a couple investors, analysts, and trading legends that really have an insight into the gold market and are truly worth consideration when they give an interview. One of those is Marc Faber, PhD in economics of the Austrian school. Recently, he blasted Keynesian ideology, which is refreshing to hear because the problems that began in 2008 have not been resolved on the fundamental level, though most people have ceased to talk about it. The gold market has and still does reflect those inherent problems of Keynesian economics, which is why gold has been the best performing commodity of the past decade and is set to be the performing commodity in the time to come.
The derivatives that are largely to blame for the escalation of the economy to the brink of crisis in 2008 are still being created and sold to this day. In fact, there were more derivatives created in the first six months of 2011 than at any other time in history. Faber sees the European problem as a symptom of the underlying problem. “Greece should have defaulted; it would have sent message that not all derivatives are equal because it depends on the counterparty.”
Whether Greece should have defaulted is beyond the scope of the question here, but the differing quality of derivatives should be taken into account. The counterparty in a derivative action will, necessarily, affect the quality of the financial asset. Of course, it should be remembered that all derivatives are simply paper and completely valueless, but how they are valued should be considered in the current market.
Faber, who recently told MSNBC that he had a good stock tip and the symbol is “G-O- L-D,” also talked about the Federal Reserve Chairman’s fiscal policy. “Mr. Bernanke’s monetary policy was designed to lift the housing market. The only asset that didn’t go up since 2008 is housing.” Faber is right. All the action by the Federal Reserve and central banks was specifically intended to revivify the housing sectors, which it has patently failed to do.
Gold, however, has gained in spades since the financial intervention began. After Lehman Brothers failed in 2008, gold fell to $681 an ounce. There was, overall, a 34 percent correction in gold in 2008. Gold has since hit an all-time high of $1,923.70 in August of 2011. That’s a very impressive market. One can recall, at many points along the way, several incorrect individuals who proclaimed gold had gotten too expensive. They were all wrong about the gold market. We now know from the fundamentals that gold will continue to rise in price so long as the fiscal policy of the Federal Reserve remains unchanged. The gold market is the only good market.
Senior Staff Writer – Certified Gold Exchange