Gold's rally above $1,900 an ounce shows no signs of a “bubble” as central banks continue to boost money supplies that has helped spur bullion to a record, according to investor Marc Faber.
“I don't think that gold is in a bubble,” Mr. Faber, publisher of the GloomBoomDoom.com, said last week. “When you buy gold, it's an insurance against systematic failure and problems in the financial markets.”
Gold climbed to a record $1,921.15 last week, underscoring Mr. Faber's contention that declining equities and weakening currencies will support demand.
Speculative buying had pushed the gold market into a “bubble that is poised to burst,”
Wells Fargo & Co. analysts led by Dean Junkans said in a report last month.
“I'd buy every month a little bit of gold,” Mr. Faber said.
Manufacturing slowed in Asia, Europe and the United States, adding to signs of slowing global growth that may force central banks to step up stimulus measures.
The
Federal Reserve in June completed its second round of so-called quantitative easing, whereby the central bank purchased $600 billion of Treasuries beginning last November, after injecting $1.25 trillion in the first round.
Citigroup Inc. and The
Goldman Sachs Group Inc. predict that the Bank of England will restart bond buying as the economic recovery weakens and bank-funding costs increase.
GOLD HOLDINGS
Holdings in exchange-traded products backed by gold rose to a record 2,217 tons Aug. 8 and stood at 2,142.4 tons last week, Bloomberg data show.
Trade volume in Comex gold futures and options rose Aug. 24 to a record 593,405 contracts, according to Jeremy Hughes, spokesman for CME Group Inc.
Gold is in the 11th year of a bull run, the longest rally since 1920 in London, as investors seek to diversify away from equities and some currencies.
It climbed to records priced in euros, Swiss francs, British pounds and Canadian dollars last week on speculation that Europe's debt crisis would worsen, damping economic growth and driving investors to protect their wealth. Futures in India and China, the world's two largest consumers, touched all-time highs.
STOCKS, BONDS
Gold is up about 33% this year, outperforming global stocks, commodities and Treasuries as investors bought more bullion, and central banks added to their reserves for the first time in a generation.
The MSCI All-Country Index of equities has dropped almost 11% this year, while the dollar has shed about 5% against a basket of six major currencies. Treasuries have returned 8.1% this year, according to data from
Bank of America Merrill Lynch.
Still, gold prices may slump as much as 30% from a record high as the dollar “outperforms” its counterparts, dampening demand for bullion as an alternative currency, Stanley Crouch, chief investment officer of Aegis Capital Corp., said Aug. 24.
