2011-12-14

Mish, ZeroHedge take on Roubini on gold

Dear Nouriel Roubini: The Fundamental Case for Gold Has Not Changed; To Understand, All Roubini Need Do is Look in a Mirror
ZeroHedge: Roubini Asks of ‘Goldbugs’ on Twitter “Where is 2,000?”
Coming from the perspective of deflation, gold is overpriced. However, all assets except the U.S. dollar are overpriced and since a major deflationary wave may include more MF Global scenarios where money market and other "cash" accounts are wiped out to zero or some reduced percentage (I saw one story saying MF Global customers may get two-thirds of their cash back, or "only" lose 33% of their cash), then physical gold in your possession is relatively attractive. It also offers wildcard protection should a major central bank surprise everyone with a massive printing scheme, and by massive I mean multiple trillions of dollars. The other factor I see is that gold bulls have correctly noted Chinese demand, but Chinese demand is conditioned on a strong economy. Should the economy slow down markedly in 2012 (and I anticipate it will), demand for gold will slow as well. Here, the wildcard is a collapse in the yuan and exchange rate driven hyperinflation in China, which could send Chinese investors into gold or U.S. dollars.
FWIW, I am allowing cash to accumulate and plan on purchasing gold at significantly lower prices from today's $1600 level. I expect the $1000 level will not be breached, but a decline of several hundred dollars from here would no surprise me, if only because there's too many people who believe in inflation. While I will calmly watch a decline, those betting on inflation may dump their positions in the face of terrible declines.

No comments:

Post a Comment