Economist Marc Faber, who is known in many circles as Doctor Doom for his oft gloomy forecasts, says that stock markets are overvalued, but stops short of saying that a crash is imminent. Though valuations are high and sentiment is dangerously optimistic, Faber argues in a recent interview with Fox Business that there are huge money flows still making their way into U.S. equities.
And over the next three to six months Faber says much of that liquidity from foreign and domestic investors may start moving into precious metals and precious metals stocks:
[There won’t be a sell off] in the near future… but if you look at the valuation of stock they’re high. If you look at the valuation of the US dollar it is high… If you look at the money flows in the last few weeks a lot of money has flown into US equities, both from domestic investors and international investors… as a contrarian this is not a particular good sign.
However, there is a lot of liquidity in the world… the liquidity will move into precious metals and precious metals stocks… so I would be long gold shares, silver shares, platinum and the underlying physical…
I also think that sentiment is much too optimistic about stocks and far too pessimistic about bonds…
Faber may be on to something, as demand for gold via ETF’s is surging at levels not seen since the 2011 run up in precious metals prices, suggesting that for those on the sidelines now may be a good time to buy gold and related assets.
As the elite meet in Davos to discuss banning cash, investors around the world are flocking to safe havens. Nowhere has this been more visible than in China, where so much money moved into BitCoin that it broke through $1000 stopping just shy of all-time highs.
The sudden and precipitous rise of the digital currency is an indicator of what may happen with precious metals should they become the next go-to safe havens for panicked investors.
With the strength of the US dollar today and President Trump recently warning that a strong dollar is not good for trade, it is quite possible that a policy shift with the new administration could weaken the dollar, adding further upward pressure on the gold price going forward.
If Faber is right, there is a perfect storm brewing for gold and silver.