Is it true that the dollar, the yen and Swiss franc may be better investments than gold if the world economy slips back into recession? That’s the claim of New York University Professor Nouriel Roubini, famous for having predicted the US housing bust and subsequent recession more than a year before they happened.
Roubini told European economic leaders at a recent conference in Italy that gold will be one of the preferred safe haven investments in the case of a double dip recession. He said:
But in that situation, things like the dollar, the yen, the Swiss franc have more upside in a situation of rising risk aversion because they are much more liquid than the gold market.
As evidence mounts that the U.S. rebound is running out of steam, we see investors rushing for bonds and other investments deemed to be secure. The price of gold has risen 14 percent this year. The Swiss franc rose to a record against the euro on Aug. 31 and the yen last month reached its strongest level against the dollar since 1995.
Without question Roubini was right about his predictions on the US housing bubble. That does not guarantee that he is right on gold. He doesn’t like gold. He got into a famous media fight with Jim Rogers last year when he said Rogers’ prediction that gold will reach at least $2,000 an ounce is “utter nonsense.” At that time he said maybe gold will reach $1,100.
It might turn out that Roubini will be right at some point about dollar, yen and Swiss franc outperforming gold. But we believe that in a long range time frame, nothing will beat gold over the next few years. We don't think that gold would form the final top any lower than $5000, and silver any lower than $100.
Why? Among many other reasons, please consider the fact that the economic situation is definitely not better (meaning less favorable for gold) now than it was the case in the 70's, and the final top for gold and silver adjusted for inflation (taking the unaltered numbers from shadowstats.com, not the official ones) is much higher than $5000 for gold and $100 for silver.
Disclosure: No positions