In a brief interview in this week’s Barron’s Marc Faber offers the following;
Gold peaked at $1,921 an ounce in September 2011. Since then, it has been in a correction mode. Sentiment is bearish, but some countries are accumulating gold, notably China, which will buy an estimated 2,600 tons this year, exceeding annual production. Prices probably are bottoming.
Gold-mining shares aren’t expensive either, although many exploration companies won’t make it. If you buy the miners, look for companies that have raised capital already or have sufficient reserves. They are best-positioned to survive the next few years if there is no upturn in the gold price.
The Market Vectors Gold Miners ETF (GDX) is down 43% this year and down 51% in the last two years. Who knows if gold is bottoming as Faber says might be the case or if it is bottoming what that will mean for the miners but in terms of remembering how markets tend to work, at some point truly hated sectors and industries do come screaming back and the gold miners will be no exception.
This is not a call to buy a specific thing right here just a reminder that things go from loved to hated back to loved all the time. It may or may not be rational but it happens. People who are very comfortable with investing in mining stocks will have a better sense of when they will turn around but they will and this will be worth paying attention to.
In related news, that dude still loves gold.