Peter Schiff Contra Roubini

Here’s a video of Peter Schiff explaining why he disagrees with Nouriel Roubini’s assessment that gold is in a bubble.

I post this video because it highlights the concern I have about (some but not all) gold bulls. It’s that Schiff’s argument can used to favor gold at any price. I understand what he’s saying and I think it has merit, but there’s no numerical anchor to the argument: “They’re printing money, so buy gold.” Up to $5,000? Up to $10,000? I’m curious at what point would the price of gold outweigh the thesis.
There are all sorts of formulae to calculate prices for stocks or bonds. They’re far from perfect, but at least they’re something. What is it for gold? Can anyone show me numbers that have historically tracked the price of gold?
Also, is Schiff’s thesis that gold should always track inflation? This is another part I don’t get. The real price of gold has outrun inflation over the past several years, even if you don’t trust the CPI numbers gold is still a big winner. Gold has even rallied as we’ve had deflation.
I would guess that, if anything, gold might have a weak relationship to the acceleration of inflation rather than its overall level. Still, this would be difficult to measure and this decade probably wouldn’t be a good example.
A few folks, including Schiff, are predicting that gold will reach $5,000 an ounce. I wonder if any gold bugs would be willing to buy a gold option from me. Say, a strike price of $4,000 for one year from today. I’ll do you a favor and take as little as $200.
No, I’m not serious but I am curious as to what gold bugs would be willing to pay for that trade.

Posted by on November 23rd, 2009 at 9:42 am

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