Given the abundant speculation about the Federal Reserve and interest rates, Marc Faber told CNBC last week he believes the Fed is closely watching the market reaction to its intimations it may raise rates in June. If the market reacts very negatively, it could hold off raising rates, while a relatively stable market could signal the OK to the Fed to raise the rate by a quarter-point.
Generally, higher interest rates support a higher U.S. dollar and weaken demand for gold as gold does not pay any interest.
However, Faber says he believes that the Fed will not raise interest rates next month. "My view is that in June, they [the Fed] will not move; they will not increase rates," Faber stated. "The market will begin to perceive that the Fed wants to support active markets, which they have stated on numerous occasions before," he added.
In that environment, "gold, which from now on may correct, maybe 5% or so, will start to move up again," Faber said.
Faber recommends a diversified portfolio. "To own some real estate makes sense, to own some equities makes sense, to own some cash and bonds probably makes sense, and to own some precious metal makes sense."
But Faber's view is some sectors will do better than others. "I can see more money printing in the future, which will lift some sectors," Faber said and went on to name them: "The most attractive assets in my view are gold shares and oil and gas shares. I think they still have significant upside potential this year."
Want to read more Gold Report articles like this? Sign up for our free e-newsletter, and you'll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Streetwise Interviews page.
1) Patrice Fusillo compiled this article for Streetwise Reports LLC, and is an employee of Streetwise Reports.
2) The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their families are prohibited from making purchases and/or sales of those securities in the open market or otherwise during the up-to-four-week interval from the time of the interview until after it publishes.