Roubini: Gold Bugs Taste Best with Spam and a Little Log Cabin Chianti
Economist Nouriel Roubini has out a fairly uncompromising critique of the current global gold ardor. He wonders why, with no near-term risk of inflation or depression, that gold has spiked higher. And here are his five answers:
- Large, monetized deficits have people worried about medium-term inflation.
- Easy money is chasing commodities.
- It is the flip side of the dollar-funded carry trade.
- The global supply of golf is limited and demand is growing speedily.
- Sovereign risk i rising, as evidenced by Dubai and Greece.
Nouriel accepts all these arguments, but then says they augur for a gradual price increase, not the current spike, thus making us prone to a sharp correction. And then he closes in pithy fashion, with this:
The recent rise in gold prices is only partially justified by fundamentals. Nor is it clear why investors should stock up on gold if the global economy dips into recession again and concerns about a near depression and rampant deflation rise sharply. If you truly fear a global economic meltdown, you should stock up on guns, canned food, and other commodities that you can actually use in your log cabin.
More here.