11/04/09 Stockholm, Sweden – A rumble is brewing between Quantum Fund co-founder Jim Rogers and New York University Professor Nouriel Roubini on the important topic of where gold’s headed. Roubini argued just last month that investors are using cheap borrowed dollars to create “huge” bubbles “not justified by the fundamentals” in assets like emerging market equities, oil, and gold.
Rogers, when confronted with the view, replied, “What bubble?” He went on, “it’s clear Mr. Roubini hasn’t done his homework, yet again.” Rogers believes the price of gold will easily increase to “the old high, back in 1980 adjusted for inflation…over $2000…some time in the next decade.”
Although Roubini and Rogers agree that the weak dollar is prompting more commodity and asset investing, they disagree on a bubble in emerging markets. According to Rogers, “they’re certainly all up a lot, maybe they’re too high, but being too high is not a bubble for anyone who knows financial markets.”
With gold breaking another record today, at roughly $1,095 an ounce, this gold debate is likely to continue. Read more about this war of words in Bloomberg’s coverage of Rogers saying Roubini is wrong on bubbles.
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A gold bubble?
And, how many americans own any gold at all? 1%?
When 30 or more % of americans own a bit of silver and gold, maybe we can talk about a bubble.
When Roubini will put his money where is mouth is… we shall see. For now, as far as I know, he gives advices and sells them but not sure if he runs an investement firms and/or publishes a track record like Jim Rogers… to be frank, i rather follow Mister Rogers than Mister Roubini…
If most of the gold were held in the hands of individuals and not collateral for the loan that bought it, then it is not a bubble. Unfortunately, most gold, for delivery, is held in Central Bank vaults and is collateral for multiple socialist schemes. Individuals just don’t own enough deliverable gold to make a difference in the long term price.
Adjusted for a dollar that has lost 95% of its value since 1913, gold is fairly valued at $450 an ounce ($20/0.05 = $400. Adjusted for the 10% nip in 1913, $400/0.90 = $444). By my meager investment understanding, gold is trading between two and three times its fair value, just like houses in 2007. That’s a bubble.