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Predaceous Stink Bug
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The article is a few yrs old so kinda upsetting to hear people debating whether gold was a bubble at 1k but some really good analysis here. The chart that shows gold rising in 3 periods of rising interest rates is encouraging. Because this is usually a go to retort from people saying gold is risky.


Roubini goes on to predict that the next tightening cycle will bring down gold prices. We don’t know why he believes this. Data that reveal the opposite relationship are not hard to obtain or interpret. Consider the impact of the previous cycle of interest rate hikes on the gold price since 1993.

The gold price increased from under $400 to over $600 as the Fed raised short-term rates from 1% to 5.25% between 2003 and 2006.

As we have noted in the analysis of Feldstein’s article, gold responds not to increases in interest rates but to real interest rates. Does Roubini believe that the Fed will soon be in a position to engineer an environment of positive real interest rates, while 11.3% of GDP fiscal deficits are needed to maintain unemployment above 9% as the housing market continues to weaken?