The Gold Bubble Has Burst, Prices to Move Towards $1,000 – Roubini

(Kitco News) – Noted economist Nouriel Roubini made headlines Monday, after releasing an extremely bearish report about gold prices during the weekend. He expects that prices will hit $1,000 an ounce by 2015, a far cry from Monday’s prices where Comex August gold closed the day session at $1,411.40.

Roubini, who has earned the nickname Dr. Doom, presented a six-point case on why the gold bubble has burst.

In his report, Roubini had few kind words for bullish gold investors, and said the yellow metal is a “barbarous relic,” with no intrinsic value, used as a hedge against “irrational fear and panic.”

The six reasons Roubini used in his report, which was published on the Guardian website, include:

  1. Although gold can spike when there are serious economic and financial turmoil, it can still be a poor investment. “…at the peak of the global financial crisis in 2008 and 2009, gold prices fell sharply a few times,” he said in the report.
  2. Gold performs best when there is a risk of inflation and despite the massive efforts by central banks around the globe inflation is dropping. “If anything, inflation is now falling further globally as commodity prices adjust downward in response to weak global growth. And gold is following the fall in actual and expected inflation,” he wrote.
  3. Gold does not provide an income. “Now that the global economy is recovering, other assets – equities or even revived real estate – provide higher returns,” he said.
  4. Interest rates, factoring in inflation, are expected to rise, making gold a less attractive investment.
  5. There is an increased risk that countries will sell their gold reserves to reduce their debt.
  6. The overhyped value of gold from extreme political conservatives. “These fanatics also believe that a return to the gold standard is inevitable as hyperinflation ensues from central banks’ ‘debasement’ of paper money. But, given the absence of any conspiracy, falling inflation and the inability to use gold as a currency, such arguments cannot be sustained.” he said.

By Neils Christensen of Kitco News


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