Faber Warns of Profit Taking in Gold, Other Commodities

Dr. Doom makes another warning for investors to follow or ignore, as Mr. Marc Faber warns of profit taking in some of the most popular assets on the market. It has been no secret that Faber feels that a recession is coming and he is now suggesting that profit taking will eat away at the positions of many investors. Just a few days ago he stated that he feels stock markets could very easily lob off 20% as he sees a correction hitting markets soon [for more economic news and analysis subscribe to our free newsletter].

Faber certainly has a point, as 2012 has by and large been a relatively strong year for a number of assets, including commodities. The benchmark SPY is up a handsome 17% this year while the SPDR Gold Trust (GLD) and DB Commodity Index Tracking Fund (DBC) are each up 14% and 5.5% respectively. Q4 has historically been strong for stocks, with some analysts predicting all time highs for major benchmarks, but it would not be surprising to see things head the other way, as our economy has a fair amount of pressure against it.

The dreaded fiscal cliff is always a looming pressure for investors, as it is all about timing your entrance and exit to certain asset classes. Let’s not forget about QE3 and the threats of future inflation, as that will certainly spark some added interest for commodities. For those of you who buy in to Faber’s theory of profit taking or even of his recessionary claims, we outline three ETFs to either take profits from, or keep a close eye on in the coming weeks [see also Marc Faber: Why Industrial Commodities Will Continue to Fail].

  • SPDR Gold Trust (GLD): The second largest ETF in the world, this fund tracks physical gold bullion and has made quite a name for itself in the investing world. Faber may be right that GLD is headed for a quick correction, but it is also hard to justify selling gold while the Fed is printing money and debasing our dollar.
  • United States Oil Fund (USO): Faber feels that riskier assets are going to be among those that suffer the most profit taking, and USO has been nothing but volatile this year. If you are up on that position, it may be time to consider selling out, although USO’s hefty movements have probably created a loss for a number of traders already [see also Crude Oil Guide: Brent Vs. WTI, What’s The Difference?].
  • DB Commodity Index Tracking Fund (DBC): This fund serves as a broad commodities benchmark, as it holds the 14 most popular futures contracts by volume. The fund has not had a stellar year by any means, but if  profit taking is on the horizon this will be an essential one to watch.

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Disclosure: No positions at time of writing.

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