In the last few days, we have seen yet another financial expert make the claim that a stock market crash is imminent and advising that investors would be prudent to diversify and create a safe haven in gold
bullion which has already risen 3% this year so far and is currently at $1,106 an ounce (at time of writing).
Marc Faber, author of the Gloom, Boom & Doom Report,a Swiss investor, investment banker and fund manager, stated in a recent
interview with MarketWatch that the stock-market downturn could result in stocks hitting lows not seen in five years. He went on to warn that the S&P 500, which dropped to 1,881 1/20/2016, could drop to its 2011 low which was below 1,200.
Now, what is the main factor for the sharp drop in the stock market and in financial liquidy worldwide? Well, Faber stated, just as we wrote in our previous article on the historic breakout of gold from oil, that this current worldwide financial concern, is because of the continuing drop in oil prices.
Faber also went on to state that the current low price of crude oil indicates a shrinking global economy. “When oil prices increase, it basically is a consequence of expanding [global] liquidity,” Faber said, so inversely, this unrelenting fall suggests contraction. As we write this, the current price of oil is at $27 a barrel, the lowest it has been for over 12 years.
So if oil continues to drop and the stock markets around the world continue to be affected by it, what can investors do? In an interview with ETF.com from December 2015, Faber was asked what investments did he think were of value? His answer was interesting. He said; “Again, if you said, “Marc, here is $1 million, but you have to put everything in either gold or in the Dow Jones,” then I would say I’d take gold.”