City brought the title battle back to life by inflicting Liverpool's first league defeat of the season with a 2-1 win on Thursday.
However, Klopp's men still hold a four-point lead at the top and have conceded just 10 goals in 21 games – six fewer than the next best in Chelsea.
"Klopp has turned Liverpool into an absolute fighting machine – both attacking and defending," he told the Mirror .
"So, if I was to put my money on one club for the league, it would be Liverpool.
"Liverpool's team is not based on the highest quality when it comes to their players. In fact, the highest quality players are at City.
"But, at the same time, that is the weakness in Guardiola. He only coaches his teams in an attacking way – always.
"The moment his team have to defend, they look terrible. Liverpool have a team that can defend much better."
After a record-breaking last season in the Premier League, City have stumbled this campaign, although no team have scored more than their 56 goals.
Van Gaal said he enjoyed watching Guardiola's men, but questioned the club’s “fighting spirit”.
"City have fabulous football ideas and a sparkling way of playing – but not the right fighting spirit," he said.
"Don't get me wrong, I still love to watch the way City play. But the way Klopp makes Liverpool play is absolutely fantastic."