Is Gold In a Bubble?

Respected investment fund manager and author of the 'Gloom, Boom & Doom Report' has advised buying gold again and says that 25% of a portfolio should be in precious metals. 

He says another move to the downside of gold is possible, but worldwide printing of money assures long term support.

Swiss born and educated Marc Faber’s contrarian voice is common on CNBC and Bloomberg TV when it comes to big-picture macro forecasting and an astute historical perspective. However, outside of the specialist financial media his astute historical perspective remains relatively unknown.

Interviewed at his residence in Hong Kong by Hard Asset Investor, Faber made the excellent point that the majority of the investment public continues not to own gold. Especially, when compared to say one popular tech stock - such as Apple.

XAU/EUR Currency Chart – (Bloomberg)

Faber said that he attends lots of conferences and usually asks the audience, “How many of you own gold?” Normally, hardly anyone owns it. I’ve been to conferences with thousands of people attending, and nobody owned any physical gold.”

Faber believes that this shows that gold is not a bubble.

“When you went to an investment conference in 1989, everybody owned Japanese stocks. And in 2000, everybody owned tech stocks. That is the bubble, when the majority of market participants own an asset. I think there are more people that own Apple stock than gold.”

Faber points out that while the price of gold has risen by quite a lot in the last 13 years (from $252/oz in 1999), the debt situation of the western world has deteriorated dramatically.

“People say the price of gold is in a bubble stage and it is up substantially from the lows in 1999, which was, at the time, around $252 per ounce. But at the same time, we had an explosion of debt, not just government debt, but private sector debt, and an explosion of unfunded liabilities such as in the pension fund industry, and not just with Medicare, Social Security and Medicaid.”

“So now, 12 years after the gold’s low, we are essentially in a situation where maybe the price of gold should be much higher because the economic and financial conditions are worse than they were 12 years ago.”

http://www.zerohedge.com/contributed/2012-18-04/gold-bubble-%E2%80%9Cmore-people-own-apple-stock-gold%E2%80%9D