Gold prices are heading towards $1,000 | NOURIEL ROUBINI BLOG

Tuesday, June 4, 2013

Gold prices are heading towards $1,000

The runup in gold prices in recent years – from $800 per ounce in early 2009 to above $1,900 in the autumn of 2011 – had all the features of a bubble. Now, like all asset-price surges that are divorced from the fundamentals of supply and demand, the gold bubble is deflating.

At the peak, gold bugs – a combination of paranoid investors and others with a fear-based political agenda – were happily predicting gold prices going to $2,000, $3,000 and even to $5,000 in a matter of years. But prices have moved mostly downward since then. In April, gold was selling for close to $1,300 per ounce and the price is still hovering below $1,400, an almost 30% drop from the 2011 high.

There are many reasons why the bubble has burst, and why gold prices are likely to move much lower, toward $1,000 by 2015.

First, gold prices tend to spike when there are serious economic, financial and geopolitical risks in the global economy. During the global financial crisis, even the safety of bank deposits and government bonds was in doubt for some investors. If you worry about financial Armageddon, it is indeed metaphorically the time to stock your bunker with guns, ammunition, canned food and gold bars.
http://www.guardian.co.uk/business/economics-blog/2013/jun/03/gold-bubble-bursts-nouriel-roubini

Nouriel Roubini, (born March 29, 1958, Istanbul, Turkey), Turkish-born American economist and educator who was best known for predicting the 2007–08 subprime mortgage crisis in the United States and the subsequent global financial crisis.

Born to Iranian Jewish parents, Roubini moved with his family to Iran and Israel before they settled in Italy in 1962. After a year at Hebrew University of Jerusalem, he studied economics at Bocconi University in Milan (B.A., 1982) and Harvard University (Ph.D., 1988), where he specialized in macroeconomics and international economics. He joined the economics faculty at Yale University in 1988 and taught there until 1995, when he moved to New York University. He also served as a visiting scholar to the International Monetary Fund (IMF), was a research associate with the National Bureau of Economic Research (NBER), held single-year terms on the White House Council of Economic Advisers (1998–99) and at the U.S. Department of the Treasury (1999–2000), and cofounded (2004) the consulting firm Roubini Global Economics. Roubini spent much of his early career studying countries that experienced extreme economic failures, such as Mexico (in 1994), Thailand and other countries associated with the 1997 Asian financial crisis, Russia (1998), and Argentina (2000). He determined that each shared one common element: a massive current account deficit.(www.britannica.com)

Nouriel Roubini is the Chairman and CEO of Roubini Macro Associates, LLC, his own global macroeconomic consultancy firm. He is also a professor of economics at New York University’s Stern School of Business. Dr. Roubini has extensive policy experience as well as broad academic credentials. From 1998 to 2000, he served as the senior economist for international affairs on the White House Council of Economic Advisors and then the senior advisor to the undersecretary for international affairs at the U.S. Treasury Department, helping to resolve the Asian and global financial crises, among other issues. The International Monetary Fund, the World Bank and numerous other prominent public and private institutions have drawn upon his consulting expertise.