Monday, December 7, 2009

Nouriel Roubini I do not believe in Gold

Nouriel Roubini Blog
In an Interview with Yahoo Finance on October 23, 2009 Roubini answered when asked about Gold as a risky asset :
" I don’t believe in gold. Gold can go up for only two reasons. [One is] inflation, and we are in a world where there are massive amounts of deflation because of a glut of capacity, and demand is weak, and there’s slack in the labor markets with unemployment peeking above 10 percent in all the advanced economies. So there’s no inflation, and there’s not going to be for the time being.

The only other case in which gold can go higher with deflation is if you have Armageddon, if you have another depression. But we’ve avoided that tail risk as well. So all the gold bugs who say gold is going to go to $1,500, $2,000, they’re just speaking nonsense. Without inflation, or without a depression, there’s nowhere for gold to go. Yeah, it can go above $1,000, but it can’t move up 20-30 percent unless we end up in a world of inflation or another depression. I don’t see either of those being likely for the time being. Maybe three or four years from now, yes. But not anytime soon."


Anonymous said...

There is inflation, and there will be stimulus after stimulus in this Keynesian world.

Anonymous said...

Where is this guy living.....Everything is fine with him. Nice for him. America is coming apart and I'm going to buy Lots of Gold before the Revolution starts. Obama today wants to Tax you really think Americans are going to pay this Tax. It's the Old Straw on the horses back. Forgetaboutit! Not a Chance.

Plan B Economics said...

So please explain gold prices in the late 1970s/early 1980s when capacity utilization was low, unemployment was high and inflation kept rising?

Gary said...

Roubini didn't say that it wouldn't happen, just not right now. That's what I think too. The Government has tremendous power to tax and print and mandate and steal in so many ways. It will take another 3-4 years to burn through our remaining resources, then the house of cards comes down in earnest.

samwesaw said...

hmmm all i know is i went to wacarnolds earlier and the southern style chicken sandwich is now smaller and lower quality and the price is the same! if i had real money i wouldnt go all in with gold but i would definitely own some! even if he doesnt expect real inflation to happen for a while that would be all the more reason to buy gold now as opposed to when gold really does go through the roof! just my thoughts though!

Anonymous said...

There is NOT inflation. (the dollar infact GAINED against the euro and yen today). Inflation is NOT an increase in the money supply. Inflation is an increase in the general price level. I know that there seems to be a school of though that equates the 2 but there has been inflation without an increase in the money supply and there has been an increase in the money supply without inflation. Roubini is right. Stop confusing politics for economics please.

Anonymous said...

Impressed by gary's words. Hope that is what roubini meant.

for the other who got it wrong:-

I think you dont understand commodities.

Inflation and Deflation is not a universal phenomenon. At any given point of time there will be economies in the world that are experiencing inflation and there will be economies that experience deflation. Inflation and Deflation are purely economic phenomenon.

The importance in gold comes because it is the best commodity (it does not rot / degrade) way for equating any 2 currencies.

When people lose faith in a currency, they stock up gold. Today if china is worried about its US dollar reserves, it can purchase gold to limit exposure to US Dollar.

With a lot volatility, it is natural that people will want 20-30% of gold to hedge any unforseen event. You will see countries now trying to move away from a risky USD to gold.

Therefore on the back of such demand due to uncertain markets, gold is expected to rise.

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