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Inflationary investment advice and protection: ‘Dr. Doom’ Nouriel Roubini warns of ‘major threats’ – gold prices should benefit

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• Nouriel Roubini warns of ten “huge threats”
• Focus on geopolitical risks and Fed policy
• Expect an increase in demand for gold

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And “Doctor Doom” warns of ten particularly explosive challenges

American economist Nouriel Roubini has often shocked the public with pessimistic market prospects. Even before the financial crisis began in 2008, Roubini had predicted it, earning him the nickname “Doctor Doom”. And in a recent interview with Kitco News, the market expert stayed true to himself and warned of no less than ten “huge threats,” which he also explains in his current book, Big Threats: 10 Threats to Our Future—and How to Survive Them. In the first part of the work, the market oracle sees the economy threatened by a debt crisis, state and corporate bankruptcy, a demographic “time bomb”, cheap money, and inevitable inflation. In the second part of the book, he also addresses the dangers of currency turmoil, deglobalisation, artificial intelligence, the new cold war, and climate change.

Intuition required

“Economic and financial cycles, the boom bubbles that burst and collapse, are becoming more intense and frequent for a number of reasons, including the toxic influence of the economy and the financial system,” market expert Michelle McCurry told Kitco News anchor. “It’s a very different world than the one I grew up in, with these huge threats that I hadn’t even heard of when I was young. Now every single one of them is a physical threat to our prosperity, to…for peace and progress.” In his book, Roubini shows ways in which the aforementioned crises can be prevented, but a sure instinct is needed. For example, climate change mitigation measures can lower the standard of living of the population, making it more likely that other mega-threats will strike again.

Conflict in Taiwan fuels geopolitical risks

With the Russian war of aggression against Ukraine, which began in 2022, geopolitical turmoil has also developed, which could worsen further in 2023, according to “Doctor Doom”. China may attack Taiwan as early as this year, Roubini suggested, referring to Michael Gilday, the US Navy chief. “Chinese President Xi came to power for a third term not because he wants to reform China, but because he wants to go down in history as the president who united mainland China with Taiwan,” the expert said. In the event of an attack, US President Joe Biden will either provide military support to the island country, which will increase tensions between the US and China and increase the risk of a nuclear war between the two countries, or leave Taiwan to its own devices. Which in turn will destroy the credibility of the United States as a reliable ally. “This is why Taiwan is so important, not because of Taiwan, but because of the consequences for US hegemony in Asia,” Roubini said. In addition to Russia and China, he considers Iran and North Korea to be among the “revisionist forces” that want discord in the future position of the United States and Europe.

The Federal Reserve is likely to push interest rate policy

But there are also some challenges within the United States, as the bearer of the bad news points out. In June 2022, inflation in the United States rose to a high of 9.1%, which is why the Federal Reserve raised interest rates so dramatically last year. The last time monetary regulators raised interest rates was in December to a range of 4.25 to 4.5 percent, and the next decision will be taken in early February. To control high prices, the Fed will have to raise interest rates to at least 6 percent, according to Roubini. However, since this would lead to an apparent recession, Jerome Powell & Co. should refrain from this approach. “It will lead to more credit crunch… The system is so indebted that trying to reduce inflation will not only lead to an economic collapse but also to a financial crisis,” Roubini said, not optimistic. Alternatively, central bankers could pause their rate increases or lengthen the periods between them, the economist suggests.

Expect increased demand for gold

In the context of these many threats, investors should focus primarily on gold, according to Roubini. “If US competitors have to stay away from dollar investments because we can use the US dollar as a weapon and sanctions can be imposed, then the only international reserve asset that the US and the West cannot seize is not the US dollar, the euro, the yen or the pound,” he said confidently. Only gold.”

The price of gold before a sharp jump

Due to the expected increase in demand, the price of gold should rise significantly according to the expert. The price of the precious yellow metal is expected to rise by about ten percent annually, and by 2028 it will have reached $3,000 an ounce. This means a total return of 60 percent for investors who get in now.

On the other hand, Roubini does not have much hope for stocks and bonds, the prices of which are likely to continue to suffer from persistent inflation and the interest rate policy of central banks. “Gold should do better because it is a hedge against inflation,” the economist explained. It is also a hedge against financial instability and a safeguard against social, political and geopolitical instability.

finanzen.net editorial office

This text is for informational purposes only and does not constitute an investment recommendation. finanzen.net GmbH excludes any claims of recourse.

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Image sources: Immersion Imagery/Shutterstock.com, Vivien Killilea/Getty Images for Berggruen Inst.

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