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Nouriel Roubini, the chairman of Roubini Global Economics and a professor at NYU
Stern School of Business, has always had strong opinions on gold and the precious metals space and his newest sentiment for the metal is likely to cause many to reconsider their holdings.
So writes Carolyn Pairitz (http://commodityhq.com) in edited excerpts from her original article* entitled Roubini Forecasts 30% Drop For Gold Prices.
[The following article is presented by Lorimer Wilson, editor of munKNEE.com and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.]
Gold to Be Gutted
Roubini wrote an editorial at the beginning of June, 3013 stating that he expects gold will fall below $1,000/oz. [saying], “Gold remains John Maynard Keynes’s ‘barbarous relic,’ with no intrinsic value and used mainly as a hedge against mostly irrational fear and panic”.
He theorizes that because gold provides no income and doesn’t pay a dividend, investors are growing yield hungry and are moving towards riskier assets as markets improve.
At the root of this precious metal bubble burst, Roubini points to the global lack of inflation… despite an increase in the money supply. “The reason (for this) is simple: while base money is soaring, the velocity of money has collapsed, with banks hoarding the liquidity in the form of excess reserves. Ongoing private and public debt deleveraging has kept global demand growth below that of supply.”
Government holdings of gold are also worrisome, as he notes that gold fell 13% one day simply because Cyprus threatened to sell a fraction of its $400 million reserves. Many countries have significantly more in reserves than $400 million; if countries like the U.S., Germany, or Italy decided to sell any percentage of their reserves the yellow metal would be done for.
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Betting Against Gold
Investors looking to place their bets with Roubini should check out the following funds for a bearish play on gold:
- 3x Inverse Gold ETN (DGLD): Offering a highly levered and inverse view of the gold futures contract market, this fund is perfect for the investor who truly believes the precious metal will tank soon…
- Daily Gold Miners Bear 3x Shares (DUST): By providing inverse exposure to publicly traded companies that are involved primarily in the mining of gold, DUST is likely to take off when gold demand takes a dive. With the added 3x leverage, this ETF can be a strong indirect play for equity investors feeling bold.
- UltraShort Gold (GLL): Built for daily investment results twice the inverse of the gold bullion, this futures-based fund has also enjoyed a strong year…
[Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.]
*http://commodityhq.com/2013/roubini-forecasts-30-drop-for-gold-prices/ (Copyright © 2011–2013 Commodity HQ; Don’t forget to subscribe to our free daily commodity investing newsletter)
More Roubini Articles & Others:
1. Gold Bugs: Look Out Below! Gold Could Drop to $1,000
Gold bugs: look out below! There are undoubtedly a lot of speculative purchases that may need to be unwound in coming years. I think gold could fall to $1000 or even less as it realigns with other commodity prices. Words: 865; Charts: 4 Read More »
2. Roubini: Falling Commodity Prices are Signs of Weaknesses In…
While falling commodity prices are beneficial to countries that are net energy and commodity importers they actually may be signals of weaknesses in the growth of the global economy and economic weakness across the globe. Read More »
3. Here’s the Track Record of Various Financial Pundits – Who’s Best?
Recently I discovered a website which tracks pundits in finance (and politics and sports) which does just that. Check it out to see how many of the calls and predictions of your favorite prognosticators have turned out to be true. You’ll be surprised and, no doubt, disappointed! Read More »
4. Nouriel Roubini: 5 Downside Risks to Global Economy Are Gathering Force
…[F]iscal austerity will envelop most advanced economies this year, rather than just the eurozone periphery and the United Kingdom. Indeed, austerity is spreading to the core of the eurozone, the United States, and other advanced economies (with the exception of Japan). Given synchronized fiscal retrenchment in most advanced economies, another year of mediocre growth could give way to outright contraction in some countries. Words: 780
5. Here’s How to Invest – and Thrive – Should Nouriel Roubini’s ‘Perfect Storm’ Engulf Us
Back in May of 2012 Nouriel Roubini (aka Dr. Doom) predicted that slowing growth in the United States, growing debt troubles in Europe, a slowdown in China, and intensifying political gridlock with Iran would come together to create a “Perfect Storm” for the world economy. Below we outline three ETFs that could thrive as global economic growth expectations deteriorate, keeping in mind that virtually no asset class will be safe if the “Perfect Storm” actually strikes. Words: 606 Read More »
6. Why is Nouriel Roubini Called Doctor Doom? Here’s Why
Nouriel Roubini is known for his pessimistic views on the health of the global economy and his nickname is Doctor Doom. Bloomberg TV recently put together a short video highlighting Roubini’s most bold and sharpest quotes from the past year, which is definitely worth a watch (see here). Read More »
Other than telling us how smart they are, I am not sure what economists like “Dr. Doom” Nouriel Roubini accomplish with repeated warnings that, ultimately, amount to little more than self-aggrandizing and incessant self-promotion. Roubini’s continued calls for Armageddon provide as much utility as a Southern California traffic report. The 405 is jammed and so is every nearby alternate route, so just stay where you are. Even meteorologists offer more useful information. There’s a heat wave — seek shade, drink plenty of water. Or it’s going to rain, grab an umbrella as you head out the door. Read More »
8. More Roubini: Fed May Not be Able to Prevent Next Stock Market Plunge
Nouriel Roubini thinks things could get so bad that the Fed may not be able to prevent the next stock market plunge, and may even go so far as to buy stocks to keep things afloat at some point. Read on to find out what else Dr. Doom thinks might be in store for us.] Words: 310 Read More »
9. Nouriel Roubini: Economic Clouds Are Rolling In From Every Direction – Batten Down the Hatches!
Dark…financial and economic clouds are, it seems, rolling in from every direction: the eurozone, the United States, China, and elsewhere. Indeed, the global economy in 2013 could be a very difficult environment in which to find shelter. Read More »
10. Nouriel Roubini: Global Economy Faces These 4 Major Downside Risks
While recent developments seem to suggest some positive news for the global economy, there are at least four downside risks that could materialize this year – undermining global growth and eventually negatively affecting investor confidence and market valuations of risky assets. [Let me spell them out.] Words: 933 Read More »
Recent favourable macroeconomic data has suggested that the U.S. economy could be back on track but the recent uplift in the economy only hides more fundamental problems…[The truth of the matter is that] US economic growth will remain weak and below trend throughout 2012 as a result of net exports continuing to be a drag and the Fed being unable, in the face of political constraints, [to do enough, soon enough,] to help the economy significantly… [Let me explain more fully why that is going to be the case.] Words: 950 Read More »
12. Nouriel Roubini: Bold and Aggressive Policy Actions Necessary to Prevent a Depression
The latest economic data suggests that recession is returning to most advanced economies, with financial markets now reaching levels of stress unseen since the collapse of Lehman Brothers in 2008. The risks of an economic and financial crisis even worse than the previous one – now involving not just the private sector, but also near-insolvent sovereigns – are significant. So, what can be done to minimize the fallout of another economic contraction and prevent a deeper depression and financial meltdown? [Below I recommend 8 ways that would do just that.] Words: 1641 Read More »
13. Nouriel Roubini: How to Avoid a Double-Dip Global Recession
There is an ongoing debate among global policymakers about when and how fast to exit from the strong monetary and fiscal stimulus that prevented the Great Recession of 2008-2009 from turning into a new Great Depression. Germany and the European Central Bank are pushing aggressively for early fiscal austerity; the United States is worried about the risks of excessively early fiscal consolidation. Words: 957 Read More »
14. Roubini: Hunker Down for More Job Losses
Think the worst is over? Wrong. Conditions in the U.S. labor markets are awful and worsening. We can expect that job losses will continue until the end of 2010 at the earliest. In other words, if you are unemployed and looking for work and just waiting for the economy to turn the corner, you had better hunker down. All the economic numbers suggest this will take a while. The jobs just are not coming back. Words: 536 Read More »
15. Fiscal Responsibility and the ‘Greater Fool’ Theory
“We overshot on the upside when [gold] went over $1,900.We’re now close to bottoming at $1,500, and if that doesn’t hold it could bottom to between $1,100-$1,200.” Read More »
17. Gold Will Drop to $1390 By Year-end & $1000 by 2013! Here’s Why
A review of the gold price written by Robin Bew, chief economist at HSBC Bank, proposes that the gold price is in danger of entering bubble territory and predicts a sharp correction by year-end and reach $1,000 per troy ounce by 2013. [Let’s examine Bew’s views more closely.] Words: 725 Read More »
18. Is Gold a “Greater Fool” Asset?
I believe the terminology “investing in gold” is a misnomer. Speculation is a better fit for the argument to own gold than considering it an investment. [Let me explain.] Words: 606 Read More »
19. Risk of Owning Gold Skewed to the Downside! Here’s Why
The peak nominal price of gold ($850/ozt.) occurred on January 21, 1980, which would correspond to about $2,450 in today’s dollars according to my calculations using the CPI. If history repeats itself [exactly, then] gold will gain another 35% or so, briefly, before becoming one of the worst investments in the world for the next decade or two. [Let me explain.] Words: 558 Read More »
20. Price of Gold Likely To Fall Below $1000 By Year End – Natixis
While there are some good reasons to hold gold at the moment, many of the drivers behind gold’s strong, decade-long run look like they have begun to turn and, as a result, the price of gold is likely to fall below $1,000, in the short to medium term, possibly as soon as year end. Words: 861 Read More »
Beware all those that encourage you to divest your PM’s just because the Central Bankers are fiddling with the charts most use to track the relationship of PM’s to the US$.
The long view is one of security, not PM bashing…