NYU Economist Nouriel Roubini Says Gold to Crash Below $1000. Is He Right?

Below is just one of a number of responses we have read to Nouriel Roubini’s gold negative editorial for the UK Telegraph newspaper of last week. As always it pays to look at someones track record in terms of predictions as when it comes to gold the below article shows Roubini has not been very accurate to date…

On December 15, 2009, when gold was trading at $1122 per troy ounce, Nouriel Roubini stated, “Since gold has no intrinsic value…there are significant risks of a downward correction rather than a rapid rise towards $2,000, as today’s gold bugs claim” and gold“looks suspiciously like a bubble”. A 35% drop after a bubble bursting is a reasonable fall for “bubble” talk, which would have sent gold into the low $700s per ounce. A month earlier, Roubini had declared, “gold at $1,500 is utter nonsense.” So how did gold perform after Roubini hawked his “gold is a bubble” message all over the news? Not only did it never retreat back to $700 after Roubini ranted against gold, but it never retreated back to $800 or even $900, and in fact it soared to above $1,900 an ounce less than two years higher, a 69% surge higher that not only crushed Roubini’s “gold at $1,500 is utter nonsense” declaration, but made Roubini’s prediction of gold’s future price behavior utterly wrong by more than 100%.

After Roubini was so ridiculously wrong and seasoned gold advocates were right back then, one would think Roubini would think twice about opening his mouth again when making predictions about gold. But nope. He’s back at it again, as his only purpose in the media and in the institutional educational system seems to be to serve as a shill for the banking elite. This week Roubini claimed that gold would retreat back below $1,000 once again, just as he did four years ago and the reasons he provides are as illogical now as they were back then, including sophomoric ad hominem attacks against gold bugs that lack any factual support whatsoever. One would think that if the media were to grant someone that made such a horrendously wrong prediction about gold just a few years ago the spotlight again, that they would discuss his past erroneous predictions to provide some context to his present predictions. However, as I explained in this article, “Independent v. Mainstream News: A Choice of Being Informed v. Being Re-Educated”, mainstream media has evolved today to behave as the propaganda division of the fascist corporate banking –government conglomerate. Today, financial journalists employed by mainstream media typically just repeat what they are instructed to tell the world by their employers without any foresight, critical thought or journalistic introspection.

So let’s take a look at Roubini’s arguments for sub-par $1,000 gold. Roubini states six primary reasons “why gold prices are likely to move much lower, toward $1,000 by 2015” even though all six can easily be dismissed as falsehoods simply by looking at the facts and ignoring Roubini’s unsubstantiated rhetoric. So let’s analyze all 6 of his statements:

(1) “Gold prices tend to spike when there are serious economic, financial and geopolitical risks in the global economy.”

This statement implies that there are no serious economic financial and geopolitical risks in the global economy, an incredulous statement if one merely looks at the facts and ignores various banker and politician declarations of economic recovery buttressed by falsely compiled economic statistics. Economic growth in India is the lowest in a decade, economic activity in the Eurozone has declined for 6 consecutive quarters, in Greece, Spain, Portugal and Italy, youth unemployment rates vary from 40% to nearly 63%, the May US Manufacturing ISM report was the worst since mid-2009, but yes, according to Roubini, there are no serious economic risks anywhere in the world today.

(2) “Gold performs best when there is a risk of high inflation, as its popularity as a store of value increases. But despite very aggressive monetary policy by many central banks…global inflation is actually low and falling further.”

According to whom? According to the Bureau of Labor, “official” inflation inside the US is only 1.1%. But anyone that actually is concerned with facts and knows that the US government has drastically and aggressively altered the inflation formula to strip away all components of inflation over the past three decades will realize that this statistic is a complete lie. But not Roubini, who believes the 1.1% inflation statistic is accurate and truthful. It’s downright scary that he is molding impressionable young minds at NYU. But then again, Roubini is just fulfilling the Rockefeller funded General Education Board’s mission in the 1900s of having young students“yield themselves with perfect docility to our molding hands.”

(3) “Unlike other assets, gold does not provide any income.”

Gold since 2001 has risen more than 460%. Obviously with this type of enormous appreciation against the USD and similar appreciation against all global fiat currencies, there has been more than ample opportunity for profit taking and gains to be taken along this journey if one desired. Again, an anti-gold argument that has zero merit if you are a logical person capable of independent thought.

(4) “Gold prices rose sharply when real (inflation-adjusted) interest rates became increasingly negative after successive rounds of quantitative easing. The time to buy gold is when the real returns on cash and bonds are negative and falling.”

As of May 31, 2013, 5 year treasuries, constant maturities, were yielding 1.05%; 10 year treasuries 2.16%. Shadowstats.com, which complies inflation statistics as they were compiled in 1980 before the government systematically altered the inflation formula to strip out components of inflation from the price index, states that current inflation in the US is about 8.5%. That means for a 10-year investment in US Treasury bonds, you presently have a very substantial real negative rate of return.

(5) “Some argued that highly indebted sovereigns would push investors into gold as government bonds became more risky. But the opposite is happening now. Many of these highly indebted governments have large stocks of gold, which they may decide to dump to reduce their debts. Indeed, a report that Cyprus might sell a small fraction – some €400m – of its gold reserves triggered a 13% fall in gold prices in April.”

Here, Nouriel transitions into full propaganda mode with the above statement. Reporting that the speculative Cyprus sale, and not the 400 tonnes of paper gold dumped into the futures market within 30 minutes, was responsible for gold’s 13% drop in April is not only irresponsible, it’s factually incorrect. To counter Roubini’s propaganda, note that back in April, that the plan to have Cyprus divest of a portion of its sovereign gold was not a plan of its own suggestion but one that was forcibly shoved down its throat by ex-Goldman Sachs banker and ECB President Mario Draghi. Furthermore, this announcement was made without ever consulting the Central Bank of Cyprus.

(6) “Some extreme political conservatives, especially in the United States, hyped gold in ways that ended up being counterproductive. For this far-right fringe, gold is the only hedge against the risk posed by the government’s conspiracy to expropriate private wealth. These fanatics also believe that a return to the gold standard is inevitable as hyperinflation ensues from central banks’ “debasement” of paper money. But, given the absence of any conspiracy, falling inflation and the inability to use gold as a currency, such arguments cannot be sustained.”

Here, Roubini transitions from full propaganda mode into full shameless ad-hominem attack-mode. Note his very careful and deliberate selection of words: “extreme”, “far-right fringe”, “conspiracy”, and “fanatics”, in an attempt to marginalize the truth with zero factual evidence whatsoever. Talk about an unsustainable argument! If the best argument one can come up with is one full of sophmoric name-calling devoid of any factual evidence, then one needs to take a re-fresher course in logic. If Roubini had taken just ten minutes to study the data of physical gold and physical silver sales worldwide during this banker executed paper-raid on gold and silver prices, he would realize that he was labeling nearly the entire Eastern hemisphere of Asians as lunatic fringe conspiracists.

Fully more than half of the economists I read about in the mass media, if they were forced to accurately dress their role, would have to wear a big red foam nose, oversized shoes and some clown face paint, as they serve no other role in this continuing global economic tragedy other than that of a Shakespearean jester who must distract the people from the truth. Because of shills like Roubini, this is why I still claim today, that “Everything I Learned About Succeeding in Business, I Learned Outside of the Institutional Academic System“.

About the Author: JS Kim is the Founder & Managing Director of SmartKnowledgeU, a fiercely independent research & consulting firm that uncovers the best ways to buy gold and silver and focuses on the realities of this current global economic crisis to help clients preserve and grow wealth.

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