Faber: I Buy Gold Every Month to Protect Against Central Bank Manipulation

RT asked Marc Faber why he invests in physical gold. Faber emphasized that nobody should put all of their assets into physical precious metals. However, if investors want to protect themselves from the volatile bubbles created by the Federal Reserve since the late 1990s, then gold and silver are essential assets. Precious metals are Faber’s “iron reserves,” and he doesn’t worry about short-term price fluctuations.

Highlights from Faber’s interview:

RT: How can one replicate a central bank short position?

Marc Faber: My sense is that eventually most investors will lose faith in money. If you have to deposit money in a currency like the Swiss franc and you get from 10-year bonds a negative rate of interest – in other words, for ten years, you will lose money every year. The money deposited is not that safe. I think a lot of people will rush and buy fixed assets such as real estate. They’ll buy gold and silver, platinum, palladium. They’ll buy art…

I really feel that we are in a very bizarre and dangerous situation where the central banks are deliberately creating another colossal bubble in the world…

RT: Gold has been treading water this year… What do you think of physical gold and paper gold?

Faber: I buy, every month, physical gold. I own gold as part of my asset allocation. It’s not that I have 100% of my money in gold, and I don’t speculate in gold. These are my iron reserves. I’m not concerned about the price of gold. It maybe goes down, maybe goes up. If you buy Tesla, maybe it also goes up and also goes down. If you buy Apple, maybe one day its worth less and one day it’s worth much more. Who knows. The point is simply I want to have some of my assets in gold.

My concern, however, is this. The establishment, the central banks, the governments – once faced with the complete failure of their new Keynesian or neo-Keynesian economic interventions with fiscal measures [and] monetary measures that have allowed global banks to still expand by $57 trillion since 2007. Once faced with the failure of these policies, they’ll blame people who own much gold, and they’ll maybe expropriate gold. That is my concern…

The gold miners are very inexpensive. Last year, when gold rebounded by roughly 20% in the first half of the year, the gold mining indices, like GDX and GDXJ went up by more than 40%. So if someone is more risk inclined, he will do better in gold miners. But it is high risk. It’s more volatile. The gold price drops $200, gold miners are going to get slammed. The gold price goes up by $100, gold miners are going to go up by a higher percentage…

If you print money is that not everything goes up equally. The central banks, essentially notably the Fed, has been printing money and creating bubbles since 1998. So we had the tech bubble, the NASDAQ bubble. Now, please tell me, how many tech stocks that peaked out in March 2000, before the NASDAQ dropped 70% have made new highs? Very few. Then we have the housing bubble. Some housing prices in some areas are at record highs, like in the Hamptons, Newport Beach, Park Avenue, Fifth Avenue, Madison Avenue – the high end. But most home prices are still significantly below the highs… We had the commodities boom in 2008, when the oil price went to $147. Now it’s down to slightly above $50. All I want to say is that the money flows not equally into the economy. Gold has done very well, like silver, since 1999. But we had this very meaningful correction post September 2011.

I’m not here to recommend anyone to buy gold. I buy gold for the reasons I just outlined. I have also real estate. I have stocks and bonds and cash.”

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