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Gold Stays as a Top Investment: Marc Faber
Muhamad Al Azhari | August 17, 2011

Renowned international investment adviser Marc Faber is telling his clients that gold should be part of their diversified portfolio in the face of rising debt in the United States and other governments. The precious metal has yet to reach inflation-adjusted highs it hit back in the 1980s. (EPA Photo) Renowned international investment adviser Marc Faber is telling his clients that gold should be part of their diversified portfolio in the face of rising debt in the United States and other governments. The precious metal has yet to reach inflation-adjusted highs it hit back in the 1980s. (EPA Photo)
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As a budding 25-year-old analyst at broker White Weld & Co. in New York City, Marc Faber compiled in his market commentary a list of stocks that might benefit from a possible devaluation of the dollar. A day later, on Aug. 15, 1971, US President Richard Nixon removed the dollar’s peg to gold, and Faber’s report proved prescient, elevating his status as the firm’s currency expert.

Another forty years on, the international investment adviser is telling investors to hold onto gold assets, in particular keeping physical gold stored in a safe deposit box outside the United States. A decade ago he advised investors to purchase gold when an ounce fetched more than $250. And he continues to recommend the precious metal as “disaster insurance policy” and “as a hedge against incompetent and dysfunctional governments” for diversified portfolios.

Last week, gold surged to a record $1,813 an ounce, and it has since settled at around $1,770, as investors sought a refuge to assets viewed as a safe haven.

The release of a series of disappointing data in the United States and its widening budget deficit raised concern that the biggest economy in the world would slip back into recession. Worries about Europe’s debt crisis spreading to France, Italy and Spain also sent investors fleeing to the Swiss franc and US Treasurys.

“I am not sure how high the price of gold or silver will increase but when I consider the further inevitable growth of the US and other governments’ debts, the creation of paper money in the world and especially at the low gold ownership rate in the world, I am confident that the price trend of gold is up,” Faber wrote in the August edition of his newsletter the Gloom Boom & Doom Report.

Still, the recent run-up in prices may have been excessive. It took just less than one month for gold to rise by $200 to $1,800, compared with a 10-month $300 advance from $1,300 in September.

“Near term I think the price could drop,” Faber told the Jakarta Globe via e-mail on Tuesday.

Yet he holds on to the view that gold, which is still far from record highs based on inflation, remains an important asset play, and any correction is a buying opportunity. According to some data reports, on an inflation-adjusted basis gold topped at more than $2,400 an ounce in 1980.

In Indonesia, with a booming economy and rising household income, consumers have been buying gold jewelry in the face of the metal’s 26 percent rise this year.