Gold Knowledge & Tips by Pierre A Pienaar

Gold Price Going to $1000 Says Nouriel "Dr.Doom" Roubini

Dear Valuable Friend,

Even with a near-term rally, Roubini sees the gold price falling long term...

IN 2005 economist Nouriel Roubini warned of the American housing collapse that would

follow a few years later, says Hard Assets Investor, introducing an interview first

published on IndexUniverse.com.

That, along with his other bearish calls that have played out, have earned him a

reputation as a "permabear" and the nickname "Dr. Doom". Roubini, the keynote

speaker at July's Inside Commodities conference in New York City, recently spoke with

ETF Report editor Drew Voros about commodities, as well as different aspects of the

global economy, and it was hardly all doom and gloom.

What follows is an excerpt from the full interview...

Index Universe: It is pretty safe to say that the commodity supercycle is dead? From

your perspective, what was the reason or reasons for its end?

Nouriel Roubini: Well, I don't think there is one reason. I would at least separate

between four categories of commodities; each one of them has a different dimension of

demand and supply. One is oil and energy; the second would be precious metals. The

third one will be industrial and base metals, and the fourth will be soft commodities and

agriculture.

There are several factors that imply the corrections. One is that China now has had a

very sharp slowdown. Even other, well-advanced economies are growing weakly now.

There is also the weakening of growth in many other emerging markets that is going to

bear down on global growth and on various commodity prices.

Secondly, in the oil and energy sector, the shale gas and oil revolution implies a

significant increase in supply. There's lots of shale gas and oil, but of course also

discoveries offshore and in oil fields from Brazil to Colombia to the oil that's been

discovered in Sub-Saharan Africa, from Sudan all the way down to Mozambique. The

supply of oil and energy is going to rise. And demand is slowing down because China's

growth is slowing down, and you also have a variety of measures taken by many

countries to save on energy and become more energy efficient.

The other thing is that when commodity prices were high, investments were made to

increase supply, whether it was in energy or base metals or agriculture or you name it.

All the new supply is coming to the market. So now the supply curve has become more

elastic, and therefore the increase in supply for any given demand curve is pushing

prices down lower.

This is a bit of a delayed cycle, and it's a combination of many different stories – the

China story, the energy-saving story, the shale gas and oil revolution, the delayed

increase in supply coming from previous high prices and so on. It's not just one story.

IU: Another one of your firm's accurate forecasts was gold's slide that we certainly have

been seeing over the last few months. Will gold fall more? Have we seen a little bit of a

rebound over the last week or so?

Nouriel Roubini: There is a temporary rebound, but in spite of that, the gold priceis still

below $1500, and it peaked at $1900 in September 2011. Our forecast, medium term –

meaning by 2015 – is that gold is going down toward $1000 an ounce, so from current

levels, another 25-30 percent correction could occur. We have written extensively on the

reasons for this:

Tail risks in the global economy are lower than they used to be. The world is not

going to end;

In spite of the QEs, inflation is going to remain low because growth is weak, and

therefore all this extra money is going into the reserves of the banks, as velocity

is collapsing. If anything, inflation is now falling both in emerging and advanced

economies. So buying gold as a hedge against inflation, in spite of all these QEs,

is not a good investment;

There is a global economic recovery. There are now other assets that provide

both an income and a capital gain – from equities to even real estate – while gold

has always been a play on capital appreciation;

Real interest rates became very negative in the US and globally. So at current

levels, they can only go higher rather than lower because there is a strong

relation in gold prices and real interest rates. However, slow as the normalization

by the Fed is going to be, eventually there will be one, and the real rates are

going to hurt things like gold;

In a world where other advanced economies are weak and emerging markets are

soft, the Dollar may tend to appreciate, affecting the Dollar prices of commodities, including gold.

Those are some of the factors. There are a couple of other factors as well. The main

ones suggest that gold prices may be trending lower rather than higher. It may rise for

one week or a month, but it is not going to be a trend. The question is, What is a trend

as opposed to short-term volatility?

IU: Do you see any diversification benefits of gold in a portfolio?

Nouriel Roubini: The question always with gold has never been black and white on

whether you want to have gold in your portfolio. The issue with gold is always, Do you

want to be market weight, overweight or underweight? In our view, in the past, there

were reasons you wanted to be overweight. But now there are these five reasons to be

underweight. It is because the gold price is more likely to fall rather than rise.

IU: What are your thoughts on other commodities?

Nouriel Roubini: We are concerned about base metals, because the slowdown of China

may end up a hard landing, which implies that demand for things like copper and others

could really sink. In the case of oil, we think the market can go slightly lower, say,

toward $90 a barrel, but it's probably not going much lower than $90, and $100 to $110

maximum; that's the range for oil. Because demand is growing less and supply is

increasing, you might have some softness in oil prices. But then there also is geopolitical

risk. If there is a war between Israel and Iran, that could lead to an increase in the sale

premium.

Soft commodities, especially agriculture and food, are slightly better supported and less

cyclical. Emerging markets are still urbanizing and naturalizing, having high per capital

income growth and having population growth with a few exceptions. Demand for food is

going to rise over time.

Natural gas prices are going to go higher, as the US starts exporting more. Prices are

low in the US and very high in the rest of the world. There's a gap between very low US

prices and high global prices. That is going to be arbitraged.

IU: Were you surprised at the GDP number that came out in late June? I saw you tweet

previously that you thought it was actually under 1 percent.

Nouriel Roubini: At Roubini Global Economics, we have been much more cautious than

consensus and policymakers about the US and global recovery. We're saying year-to-

year growth is going to be barely 1.7, 1.8 percent. And next year, where people expect 3

percent growth, we said 2.4 percent. Guess what: Consensus at the beginning of this

year was 2.3 percent, 2.4 percent. Now it's 1.8 percent. So regarding next year – where

three months ago consensus was at 3 percent, and we were at 2.4 percent – now

consensus is down to 2.7 percent, and I think it's going to be revised further downwards.

We have been, for many reasons, of the view that while the US is recovering, there will

be lots of head winds, starting with the fiscal drag and gridlock in Congress and the

variety of weaknesses, particularly the household sector. We have been proven right.

But in the short run, good news is good for the equity markets. And bad news is also

good, because it leads to more and longer QE.

IU: What's your forecast for growth going forward?

Nouriel Roubini: Growth is going to accelerate in the second half and be very strong

next year. We believe that growth is going to be slightly better in Q2 [2013], and start

to grow more in the second half. We expect tapering to start in December, with maybe

the earliest start in September, and not being done next or late in the summer. Tapering

could even start later than that if the economy in the second half of the year disappoints

more than we expect. So it all stays contingent.

Hardassetsinvestor.com is a research-oriented website devoted to sharing ideas about

investing in the natural resources sector. Published by Van Eck Associates Corporation,

the site offers an educational resource for both individual and institutional investors

interested in learning more about commodity equities, commodity futures, and gold – the three major components of the hard assetsmarketplace.

See full archive of Hard Assests Investor.

Please Note: All articles published here are to inform your thinking, not lead it. Only

you can decide the best place for your money, and any decision you make will put your

money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Thank you for your interest, Brian Booth Senior Market Strategist

Longleaftrading.com

bbooth@longleaftrading.com

888.272.6926

GOLD Near Term: Upside favored

Time: 06-08-2013 03:36:00

Pivot: 1283

Our View: Long position above 1283. Target 1320. Conversely, break below 1283, to open 1273.

Comments: The pair remains supported. Further advance favored.

Key levels

1348

1331

1320

1291.93 Last Price

1283

1273

1260

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Pierre A Pienaar

Blog: http://www.resourcesindependenttrader.blogspot.com

Pierre A Pienaar retired in 2011 from business.

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