Why Roubini is wrong on gold

Professor Nouriel Roubini, the man who predicted the financial crash, thinks gold is in a bubble. In part, he's right. But if he thinks gold's not in a long-term bull market, he's mistaken.

Bad news for gold bugs: Professor Nouriel Roubini, the man who, as the FT puts it, "came to fame for predicting the global crash in financial markets", still refers to gold as a "barbaric relic".

But even worse than that, he thinks our favourite metal is "in part a bubble that could easily go bust". I don't entirely disagree with him.

Almost everything is in a little bit of a bubble, simply because of the low-interest-rate/high-liquidity environment in which we live. And I never expect anything to move in a straight line corrections are par for the course.

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But I still believe that gold is in a long term bull market, one that is still a long way from its end, and one that isn't going "bust" any time soon.

Why? Because the supply and demand fundamentals are good. There is little new supply mine supply has been falling on and off for years, and the central banks who used to regularly flood the market are now buyers rather than sellers. But there is plenty of new demand both from those central bankers and from investors who, thanks to ETFs, now have an easy way into the market.

The key point here, however, is not that there is new demand for gold. It's why there is new demand for gold.

Roubini says that he can only see one scenario in which gold would "rapidly rise in value": one in which "fiat currencies are rapidly debased via inflation". Clearly, he doesn't think that is very likely (or he'd be a gold bug too). I think it's a dead cert. Not this year, maybe not even next year, but at some point before the crisis is fully played out.

That's why I'm hanging on to my gold.

Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.