If S&P falls 100-200 points, we will see QE3: Marc Faber

Another round of quantitative easing in the US will depend on the direction of the SandP 500, Marc Faber, editor of the Gloom, Boom and Doom Report told CNBC Monday, following Federal Reserve Chairman Ben Bernanke`s failure last week to hint at a QE3.

"(QE3) depends on the SandP, if the SandP drops 100-200 points, then yes, for sure we will have QE3 but if the SandP stays here or even goes up, the likelihood of QE3 diminishes," Faber said. Since the start of 2012, the SandP has risen 9%, compared to gains of 11% for the Nasdaq Composite and a 6% return for the Dow Jones Industrial Average. "Bernanke targets asset prices, he doesn`t admit that, but he doesn`t want asset prices to go down," he said, adding that the first two rounds of quantitative easing were largely responsible for the upside in US stocks last year. "The SandP went up from 666 on March 6 2009 to 1,370 [currently] so it has more than doubled and that has to do with QE1 and QE2," he said. Faber adds that the movement in oil prices will also contribute to the Fed`s decision on whether to implement QE3 or not. If Brent crude prices were to soar to USD 150 a barrel, or rise 20% from current levels, he believes the Fed would have an "even more excuse" to flood the market with liquidity. Correction Ahead for Equities While Faber is generally upbeat on equities as an asset class, he is calling for a short-term correction in global stocks in the "period directly ahead". "Markets are overbought, technically they have deteriorated, and we have very heavy insider selling, so I think a correction is coming," he said. Faber, who expects to see high volatility in all asset classes over the next few years, says the ideal asset allocation for the moment is 25% each in equities, real estate or real estate related equities, cash and gold. "I don`t think (investors) should be shooting for huge gains, but rather for preservation in capital," he said. Discussing his outlook for gold, Faber, a well-known gold bull, says it doesn`t offer an attractive buying opportunity right now. He believes the precious metal is in "correction time" and doesn`t rule out the prospects for gold to fall down to USD 1.500 an ounce this year. "We made a peak at USD 1,921 on September 6 and we dropped to USD 1,522 on December 29, so around USD 1500 is very strong support." Copyright 2011 cnbc.com