'I don't believe in gold,' says Nouriel Roubini
Source: BI-ME , Author: BI-ME staff
Posted: Sat October 24, 2009 11:02 am

INTERNATIONAL. Nouriel Roubini, a professor at the Stern Business School at New York University and chairman of Roubini Global Economics (RGE), who predicted the current financial crisis two years ago, said gold can only go up on inflation or another depression.

Speaking in an interview with Dave Nadig of Index Universe (IU.com) Roubini said: "My view is to stay away from risky assets. Stay in liquid assets".

Roubini said asset prices have gone up as a result of liquidity in the system, however he sees a correction looming.

" I don’t know when the correction is going to occur, it could be a while longer, but eventually it will be a pretty ugly correction, across many different asset classes," he said.

Answering a question on gold, Roubini said: "I don’t believe in gold".

Explaining his reasoning, he  added: "Gold can go up for only two reasons. [One is] inflation, and we are in a world where there are massive amounts of deflation because of a glut of capacity. So there’s no inflation, and there’s not going to be for the time being".

"The only other case in which gold can go higher with deflation is if you have Armageddon, if you have another depression".

"So all the gold bugs who say gold is going to go to US$1,500, US$2,000, they’re just speaking nonsense," Roubini said.

"Without inflation, or without a depression, there’s nowhere for gold to go," adding  maybe it could happen in three or four years from now.

"But not anytime soon," he said.

Roubini has been expressing concerns for some time that the current price of gold looks overextended as deflation is likely to outweigh any risks of inflation in the near term.

For the next two years, deflationary pressure is going to be dominant, and it is going to become a time bomb down the line if and when we keep monetizing large deficits," he said.

"Unless we have high inflation, or...other risks like depression, gold looks toppy," he told a Reuters Investment Outlook Summit in June.

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