Gold will outperform market: Marc Faber

Also bets big on real estate.

Investment guru Marc Faber believes that precious metals will outperform the Indian stock market in the next three to four years.

"Central banks across the globe who had sold gold, would buy back the yellow metal in due course. In my opinion, gold and silver will outperform all other asset classes," he told Business Standard on Monday.

Faber, known for his contrarian views, is also extremely bullish on Indian real estate. "I like real estate in India even though it may be peaking in some places because urbanisation is growing and people are becoming richer.

Buy any property you want... even a beach resort," he said.

The author of the famous Gloom, Boom & Doom Report is not sure whether India will be one of the best performing stock markets this year. "I think China will perform better than India," he said.

According to him, India is not cheap. "It is selling at about the same P/E multiple as the S&P 500, but I would say the quality of earnings is much better than those of the S&P and so I would rather be in Indian stocks than S&P stocks," he observed. The Swiss-born economist is cautious about asset markets around the world.

"I am concerned because the bullish sentiment is running at a very high level and portfolio managers for every asset class "" be it stocks, bonds, commodities, gold, and art "" are bullish. One of them has to give up and perhaps the most vulnerable asset right now is the US dollar," he said.

Faber also believes that there is more of a slowdown in the Chinese economy than government statistics suggest. "This could be one of the surprises of 2006, a significant slowdown in the Chinese economy," he said.

While there has been an improvement in the quality of loan portfolio of the Chinese banks, truck sales are declining and real estate prices in Shanghai are down 30 per cent.

However, Faber is clear that there is little correlation between corporate results and stock market performance.

"The Chinese market is down 50 per cent over the last three years and valuations may not be compelling but some stocks are not expensive. Besides, there are technical factors that can drive stock market performance," he said.

Faber feels countries that have large reserves in dollars may want to diversify their holdings. "India should move out of the dollar and buy oil reserves," he suggested.

"I doubt that India and China can conserve energy since the consumption is already low. My bet is that the next World War will be fought over oil reserves. No oil, no growth. It is as simple as that," he said.