"We overshot on the upside when we went over $1,900," said the fund manager, who has 25 percent of his portfolio in gold.
"We're now close to bottoming at $1,500, and if that doesn't hold it could bottom to between $1,100-$1,200."
Faber, who said that the recent sell-off had come about following nervousness about industrial metals, added that a 40 percent correction wouldn't surprise him.
US gold futures suffered their biggest daily drop in more than five years on Friday.
Recent falls in the gold price came after a sustained rally which saw some predict that prices would hit $2,000 or even higher.
While he is bearish in the long-term, he forecast a rebound in markets in the short term.
"Both equity markets and gold markets have become very oversold, and I think a rebound is occurring," he said.
"Following this rebound, which I expect to get underway this week, there will be a longer slowdown."
John Woods, Chief Investment Officer at Citi Private Bank, told CNBC Monday that he believes gold will fall to around $1,400 before continuing its long-term rise.
"It was massively over-bought in the last couple of weeks and now it will get over-sold," he said.
"I don't think the long-term trend is broken."
Faber predicted a short-term rebound when he spoke to CNBC at the start of August . Since then, the S&P 500 has fallen by 50 points.
"Asian markets are weak, Asian currencies are weak and economically sensitive stocks are weak because there's a more meaningful slowdown in China," he said.
"You have a capital goods level where capital spending increases dramatically and companies keep spending to a high level, but because of the acceleration, it can lead to recession simply by the economy growing at a steady rate, and I think we are at this point in China."
Some observers have warned that the true scale of China's debt is much larger than official statistics suggest, as much is held at the local government level after a huge stimulus following the post-Lehman slowdown.
However, Faber said that long-term investors who "believe in the Asian economic growth story" should not be spooked.
"In China at least deficits and government intervention is leading to infrastructure spending. There are overcapacities but ultimately these will be used," he said.
Faber also maintained that "it would be a huge disaster if banks weren't able to speculate," after the resignation of UBS chief executive Oswald Gruebel Saturday following the much-publicized failure of internal controls to halt a $2.3 billion loss, apparently from one rogue trader.