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LONDON (Commodity Online): Global investing guru and publisher of the famous Gloom, Boom and Doom report Marc Faber says gold price may continue to drop as low as $950 to $1,050 an ounce, but that is not any reason to sell gold. “The dip in gold price is a correction and this should be taken as a great buying opportunity,” Faber said.

As gold price has surged to touch historic highs in the last few months, Faber, a gold bug, has been telling investing public that the yellow metal is cheap at $1,100 per ounce and it will be prudent if they buy the yellow metal at this rate or below so that they can reap rich dividends in 2010.

According to Faber, gold price has been falling in the last few weeks thanks to a temporary surge in the US dollar. “But the weakness that gold has shown recently is no reason for investors to get out of gold investments. I still believe gold should continue to be part of every investor’s wise investment portfolio,” he said.

Recently, Faber stated that gold price wouldn't drop below the $1,000 an ounce mark ever again. A renowned investor that he is, Faber feels that it is the right time to buy gold at these current levels, rather than dumping gold.

”There is no doubt the printing of money from central banks around the world is generating inflation, and it will increase going forward. That alone is a good enough reason to have gold in your investment portfolio,” Faber said.

Faber foresees the second half of 2010 when gold price will boom.

Last month, Faber had said that the most interesting currency that people should invest now is gold as the US dollar is on a bearish run.

”Gold remains the best bet as a currency these days because of the fact that the yellow metal supply is extremely limited,” he said.

Faber says gold price should be treated in the same way that a company’s stock is being treated by investors. “A company’s stock could be less expensive at $100 than when it was selling for $10, because earnings growth has outpaced the appreciation of the shares and therefore its P/E has declined, gold could be cheaper at the current price than when it was at less than $300 because of the explosion of foreign exchange reserves in the world, zero interest rates, the huge debt overhang, and the expectation of further money printing,” he said.

According to Faber, global reserves of gold have grown from about $1 trillion in 1995 to over $7 trillion.

”Therefore, the share of gold in the world’s official reserves has declined from 32.7 per cent in 1989 to a current record low of 10.3 per cent,” he pointed out.

Faber said that he is still puzzled by the deflationists, who cannot understand that the explosion in foreign exchange reserves over the last 15 years is a symptom of a massive monetary inflation. “Ergo, I could argue that gold is now actually less expensive than when it sold for around $300 per ounce,” he said.

Faber said that central banks in emerging economies keep only a tiny fraction of their reserves in gold. “Eventually, I would expect them to follow the example of the Reserve Bank of India (RBI), which recently bought 200 tonnes from the IMF for $6.7 billion,” Faber pointed out.

”Now, just consider what the impact would be if China were to increase its gold holdings from presently less than 2 per cent of its $2.2 trillion reserves to 6 per cent or 10 per cent. Each 1 per cent increase in gold weighting would mean gold purchases of more than $20 billion, or nearly 600 tonnes,” he said.

Faber said that gold’s value may go from $1,100 per fine ounce to $1,500 or $5,000.

But he added that he “would not invest more than a sliver” of his wealth “into something without intrinsic value, something whose positive value is based on nothing more than a set of self-confirming beliefs”.

Faber said that he is not a perennial gold bug. “But, when governments spend far more than they collect in taxes (large fiscal deficits), and when central bankers engage in reckless monetary policies and, instead of treating the causes of the problems (excessive debt growth), treat the symptoms (deflationary forces), gold as a currency does make a lot of sense,” he added.

source HERE