Nouriel Roubini is a household name in the financial world as
his nickname, "Dr. Doom," has been rightfully earned, given his
propensity for bearish sentiment. Roubini is also not afraid to
speak his mind as he has been issuing warnings about the global
economy for the past few years. Now, the Dr. has commented on the
commodity industry, as he believes its struggles reveal a bigger
trend that could see the global economy slip.
"What has happened for the last few weeks is that most of the macro
economic news has been actually quite negative and surprising on
the downside," said Dr. Doom in a recent interview. He went on to
name a number of factors such as a weakening eurozone, slowing
growth in China, and a weak outlook for the US given the sequester
and tax hikes that went into place this year.
Roubini suggests that the growth worries of the world's largest
economies have caused commodities to fall in recent months. Though
falling prices certainly benefit importers, Roubini believes that
prices are being lowered due to expectations of lower economic
growth, meaning that the drop in commodities may be preceding a
similar trend in other asset classes and impacting central bank
policies around the world. "The reason why central banks keep on
printing money is because they worry about downside risk to
economic growth," he goes on to say.
Gold to March Higher
Despite the weakness that gold has seen in recent weeks, Roubini
notes that while many commodities are sputtering, gold still has
the potential to make big strides over the long term. Firstly, he
notes that many rush to gold when substantial fears of a global
economic crisis arise, an event that he seems to expect in the near
future. He also expects gold to get some much needed relief as
investors being to worry about inflation given the money printing
in both the US and Japan.
His final point is something of a rarity in that he actually gives
the current economy some credit for its recent strength. Roubini
suggests that falling gold prices are due to a stronger economy and
more investors piling into equity markets as of late, seeking a
higher return. Of course, this does not change his view for the
long-term global economy, but he is at least willing to admit that
there has been some growth in the past few months and years, even
if he does feel that it will be short-lived.
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Editor's note: This article by Jared Cummans was originally