Posted on 06/02/2013 6:02:49 AM PDT by blam
NOURIEL ROUBINI: 6 Reasons Why Gold Will Plunge To $1,000
Joe Weisenthal
Jun. 1, 2013, 4:27 PM
Gold has been getting poleaxed in recent months, though it remains just below $1400/oz.
In a piece up at Project Syndicate, economist Nouriel Roubini says gold will fall to around $1,000 before the end of 2015.
He gives six reasons why.
We summarize:
* Gold spikes during extreme crises. The crises are over.
* Gold does well during periods when there's a risk of high inflation. That clearly is no longer a big worry, given how much central banks have unsuccessfully tried to stoke even modest inflation.
* Now with the economy recovering, nobody wants to be in rocks that don't pay any dividends.
* Real interest rates are rising. That kills gold. Governments with debt issues are selling gold.
* Gold was juiced by right-wing fanatics in the US. That boom is over.
(Excerpt) Read more at businessinsider.com ...
The only way that gold will fall is if we have a general commodity collapse.
That could happen.
But the US is facing a total disaster on wheat production this year. The cattle herds have been sold off in huge numbers because of the drought in the Southwest and at some point as rain returns beef prices will spike.
Gold? You cannot eat it. Wheat & cattle you can if you can afford it.
I am always wary of “advisers” who refer to “right wing fanatics”.
The only reason he gave that is even real is that real interest rates are rising. “Gov’ts with debt issues are selling gold”; not sure where he’s going with that one, I always thought that whoever ends up with the most gold wins.
The price of paper gold may be pushed down, but there is now a disconnect between that and physical gold.
If the dollar becomes worthless, with what would you pay for that scarce beef or grain?
That's just one of the reasons it makes good money.
There is “paper” gold and there is physical “in your hands” gold. The latter has a substantial premium - the market is saying something.
"Perhaps now you know why the Chinese are buying up so much gold – hundreds of tons of it at a crack, and more and more all the time! As are other peoples and central banks! – and why they are thus going to have a very strong currency, and why they are going to have a vibrant, self-sustaining economy based on real demand, instead of depending on the fake demand caused by both government deficit-spending and everybody borrowing themselves into bankruptcy to consume things."
When fiat dies, everyone is going to rediscover the concept of 'coincidence of wants'. They will find out what money is for and why we value things that act as money.
Am I going to have to pull out the bingo card again?
A lot.
We sold our small herd of cattle 2 years ago. Have not repurchased because of lack of winter grazing. You cannot afford to feed them grain & hay all winter without winter pasture. No rain, No pasture.
At some point, soon, the price will spike.
Last year we made 1/2 the normal wheat crop. This year is looks like 1/4 the normal. And we are lucky, 90% of the acreage planted was so bad that they will never harvest it, claim the insurance. Locally, seed wheat will be extremely scarce this fall. I am in the process of looking out of state for a way to supplement that. Not sure it is practical, but we shall see.
No, we are on the same page.
I am hoping that we avoid the dollar collapse, due to the fact that all other currencies are worse than ours.
Everyone talks about the ChiComs buying gold, but surely no one would trust the ChiComs character. They have their own problems too.
With the right leadership, the US can make a quick turn around. But it will require more than trimming the ship.
Men are vein enough to think they control their destiny, but that is a job for one with a higher rank.
2. Gold does well during periods when there's a risk of high inflation. That clearly is no longer a big worry, given how much central banks have unsuccessfully tried to stoke even modest inflation.
"Inflation is NOT rising prices. It is the increase in the supply of money. The Fed is creating $85 billion a month. That's inflation on an unprecedented scale."
3. Now with the economy recovering, nobody wants to be in rocks that don't pay any dividends.
"Ah, what recovery? Is he talking US or Europe or world? Europe unemployment has hit new peaks. In the US graduates can't find any jobs. And can you believe government stats?"
4. Real interest rates are rising. That kills gold. Governments with debt issues are selling gold.
"Maybe all that thin air money is finally hitting the real economy, that you need higher returns to make up for losses due to inflation."
5. Gold was juiced by right-wing fanatics in the US. That boom is over.
"Hmmm, I didn't realize Central Banks were American and right wing fanatics to boot. How about those Indians, Chinese and Arabs buying gold?"
This and most other economic predictions will prove to be wrong and no one will remember.
Here’s one. Only this one is right. The ruling elite will give itself more dollars to compensate for their reduced buying power.
“Right-wing fanatics” = anyone who still believes that uncontrolled government spending and debt are bad.
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