In 2009, Noriel Roubini, the well known NYU economist, boldly commented “all the gold bugs who say gold is going to go to $1,500, $2,000, they’re just speaking nonsense.” Gold, trading at the time in the $1100 range, promptly went straight up — to well over $1900 per ounce by 2011.
It was Mr. Roubini, not the so-called gold bugs, who was talking nonsense.
In a new article titled “A Global Perfect Storm,” he starts off with this: “Dark, lowering 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.” (My emphasis)
“[W]hile the cloud over the eurozone may be the largest to burst,” he goes on, “it is not the only one threatening the global economy. Batten down the hatches.”
Roubini goes on to outline an essentially disinflationary outcome to the current global turmoil. In the post-Lehman Brothers confusion, gold defied expectations by adding disinflation to the list of economic ills against which it provides a hedge. Its rise occurred precisely because it was a “very difficult environment in which to find shelter,” as Roubini puts it. Investors did “battten down the hatches” by buying gold coins and bullion in record amounts (and, by the way, continue to do so now). Though long on advice for the European Union in his visit to the dark side of the world economy, he comes up short on anything useful for the ordinary investor. He never once utters the word “gold.” Perhaps he should reconsider.
After all, what does one do when confronted with A Global Perfect Storm??