Roubini: Rapid Recovery is Mission Impossible; Gold Not Such a Good Investment

“If there was a double-dip recession, increasing risk aversion, some assets are going to be preferred, and gold will be one of them,” “But in that situation, things like the dollar, the yen, the Swiss franc have more upside in a situation of rising risk aversion because they are much more liquid than the gold market.”

The comments are from Ubiquitous Economist Noriel Roubini in a interview with Bloomberg, in essence saying that the U.S. dollar, yen and Swiss franc are better investments than gold if the world economy goes back into recession.

He adds:

"I believe that gold is going to trade around current levels,” “There are two extreme events that lead to a spike in gold. One is inflation, but we have no inflation in advanced economies. If anything, there is a risk of deflation.”

“The other event in which gold prices go up is the risk of a global financial meltdown, and that tail risk has been reduced because we backstopped the financial system,”.

Roubini also forecasts a slowing U.S. economy in the second half of 2010 as “tailwinds” such as fiscal stimulus and inventory adjustment become “headwinds.”:

“We can try to prevent double-dip recession, but the idea we are going to have rapid recovery of growth to potential in advanced economies -- U.S., Europe, Japan -- is mission impossible,”

“Job creation is going to be very, very mediocre,” “It’s going to feel like a recession even if we’re not in a recession.”

He adds that the underlying problem is that debts need to be reduced and this will take time and require an extended period of slow growth.