We have to distinguish between precious metals and industrial commodities. My concern is that the Chinese economy is going to be weaker than is expected and that the demand for industrial commodities will probably disappoint. So I am not particularly keen on buying industrial commodities at this stage. In the case of gold, as you know we had a 10-year bull market and we peaked out in dollar terms on September 6. 2011 at USD 1,921 per ounce at which stage the gold price had somewhat overshot on the upside and we are in a correction phase. Then the question will be whether the precious metals rally again and will they exceed the peak of 2011 or not.
According to Marc Faber, what we will see in 2012 is “initially some further weakness in emerging economies against the US market and then a major low in emerging stock markets“.
In an interview to MoneyControl, Mr. Faber does not sound too positive on Emerging Markets for this year, but sees some buying opportunities after the “storm”… highlights below:
US x Emerging Markets
We have to clarify … how bad it was for equities worldwide because the US market was flat and it significantly outperformed most other markets in the world in particular emerging economies stock markets. This resembles the underperformance we had in 2008 that made the major buying opportunity. What we will have in 2012 is initially maybe some maybe further weakness in emerging economies against the US market and then a major low in emerging stock markets, including, India… we are getting there slowly.
… what we had in 2008 was the outperformance of the US and emerging economies’ stock markets and commodity markets got hit very hard but it lead to a major low in emerging stock markets that bottomed out between October 2008 and March 2009 and after that emerging stock markets outperformed the US until say the end of 2010. So I think we may get a similar picture. That’s why when I read all the strategies that say – I think we should invest in the US, I say maybe that’s correct for the next three months or so but I would rather be looking at an entry point in emerging markets over the next six to nine months…
If the S&P; drops another 10% you can be sure that there will be more QE in the US. So the markets would be supported by additional liquidity injections.