Dr. Doom is back in the news, this time predicting the end of
the gold bubble. While this claim may seem outlandish to some,
analysts are hard-pressed to ignore Nouriel Roubini, after his
prediction of the 2008 financial crisis fell on deaf ears. The
chairman of Roubini Global Economics and a professor at NYU Stern
School of Business, Roubini has always had strong opinions on gold
precious metals space
, and his newest sentiment for the metal is likely to cause many to
reconsider their holdings.
Gold to Be Gutted
wrote an editorial
at the beginning of June stating that he expects gold will fall
below $1,000 per ounce, taking prices down to approximately 30%
from current levels, which is a point not seen since 2007. "Gold
remains John Maynard Keynes's 'barbarous relic,' with no intrinsic
value and used mainly as a hedge against mostly irrational fear and
panic," writes Mr. Roubini, who has a past of strong opinions on
precious metal investing.
He theorizes that because gold provides no income and doesn't pay a
dividend, investors are growing yield hungry and are moving towards
riskier assets as markets improve.
At the root of this precious metal bubble burst, Roubini points to
the global lack of inflation (
a heavily debated point
) despite an increase in the money supply. "The reason (for this)
is simple: While base money is soaring, the velocity of money has
collapsed, with banks hoarding the liquidity in the form of excess
reserves. Ongoing private and public debt deleveraging has kept
global demand growth below that of supply."
Government holdings of gold are also worrisome, as he notes that
gold fell 13% one day simply because Cyprus threatened to sell a
fraction of its $400 million reserves. Many countries have
significantly more in reserves than $400 million; if countries like
the US, Germany, or Italy decided to sell any percentage of their
reserves, the yellow metal would be done for.
Betting Against Gold
Investors looking to place their bets with Roubini should check out
the following funds for a bearish play on gold.
3x Inverse Gold ETN
(NYSEARCA:DGLD): Offering a highly levered and inverse view of
the gold futures contract market, this fund is perfect for the
investor who truly believes the precious metal will tank soon.
Year to date, returns for this fund are already up a remarkable
53.71%, receiving a huge bump after gold's fall in April.
Daily Gold Miners Bear 3x Shares
(NYSEARCA:DUST): By providing inverse exposure to publicly traded
companies that are involved primarily in the mining of gold, DUST
is likely to take off when gold demand takes a dive. With the
added 3x leverage, this ETF can be a strong indirect play for
equity investors feeling bold.
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Editor's note: This article by Carolyn Pairitz was originally
(NYSEARCA:GLL): Built for daily investment results twice the
inverse of the gold bullion, this futures-based fund has also
enjoyed a strong year, returning nearly 40% since the start of