Nouriel Roubini, the chairman of Roubini Global Economics and a professor at NYU Stern School of Business, has always had strong opinions on gold and the precious metals space and his newest sentiment for the metal is likely to cause many to reconsider their holdings.
So writes Carolyn Pairitz (http://commodityhq.com) in edited excerpts from her original article* entitled Roubini Forecasts 30% Drop For Gold Prices.
[The following article is presented by Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com and www.munKNEE.com and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.]
Gold to Be Gutted
Roubini wrote an editorial at the beginning of June, 3013 stating that he expects gold will fall below $1,000/oz. [saying], “Gold remains John Maynard Keynes’s ‘barbarous relic,’ with no intrinsic value and used mainly as a hedge against mostly irrational fear and panic”.
He theorizes that because gold provides no income and doesn’t pay a dividend, investors are growing yield hungry and are moving towards riskier assets as markets improve.
At the root of this precious metal bubble burst, Roubini points to the global lack of inflation… despite an increase in the money supply. “The reason (for this) is simple: while base money is soaring, the velocity of money has collapsed, with banks hoarding the liquidity in the form of excess reserves. Ongoing private and public debt deleveraging has kept global demand growth below that of supply.”
Government holdings of gold are also worrisome, as he notes that gold fell 13% one day simply because Cyprus threatened to sell a fraction of its $400 million reserves. Many countries have significantly more in reserves than $400 million; if countries like the U.S., Germany, or Italy decided to sell any percentage of their reserves the yellow metal would be done for.
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Betting Against Gold
Investors looking to place their bets with Roubini should check out the following funds for a bearish play on gold:
- 3x Inverse Gold ETN (DGLD): Offering a highly levered and inverse view of the gold futures contract market, this fund is perfect for the investor who truly believes the precious metal will tank soon…
- Daily Gold Miners Bear 3x Shares (DUST): By providing inverse exposure to publicly traded companies that are involved primarily in the mining of gold, DUST is likely to take off when gold demand takes a dive. With the added 3x leverage, this ETF can be a strong indirect play for equity investors feeling bold.
- UltraShort Gold (GLL): Built for daily investment results twice the inverse of the gold bullion, this futures-based fund has also enjoyed a strong year…
[Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.]
*http://commodityhq.com/2013/roubini-forecasts-30-drop-for-gold-prices/ (Copyright © 2011–2013 Commodity HQ; Don’t forget to subscribe to our free daily commodity investing newsletter)
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