Wednesday, August 20, 2008

Dr Doom: ‘Let us just assume the financial system blows up…’

From FT Alphville:

Gold — and the division of assets - is on the mind of Marc (aka Dr Doom) Faber this week in a special interim note to his subscribers. It’s not a particularly attractive trade right now, he notes, although personally, he’s hooked. And anyway, people have been asking …..

For investors with all their assets in US dollar cash (and no other holdings), Faber suggests accumulating gold from here on down to possibly $600/oz. While not necessarily forecasting such a drop (from the current level of about $820/oz), he notes the metal could decline to that level.

Those with “99 per cent of their assets in gold and no cash flow” should hold for now, says Faber, as the gold chart looks “truly horrible” since prices fell below the key support levels of around $850.

For traders, however, gold may have some short-term appeal right now because it is becoming oversold. But what, then, is the immediate upside potential? Heavy resistance would seem to exist at $850-$900 while the downside risk is at least as large as the upside potential....MUCH MORE