> And you believe that in an economic crisis, people are going to want to buy these things?
Gold is obviously more common in some cultures, and could be used for trade if paper money swings wildly. For example, a kilo of gold (32.15 troy ounces/$86k) is not an uncommon incentive gift from real estate developers in China when purchasing properties, to offset variations in costs and pricing. However, in the US, my observations have been the gold buyers are looking for an easy buck.
China is very different. People in China are buying "beans" of gold for $87. Chinese consumers have fewer investment options that are secure, and real estate investments are less favorable now.
"...there is a growing sentiment that the gold market is governed no longer by economic factors but by the whims of Chinese buyers and investors. “China is unquestionably driving the price of gold,” said Ross Norman, chief executive of MetalsDaily.com, a precious-metals information platform based in London. “The flow of gold to China has gone from solid to an absolute torrent.”"
Another interesting quote:
"When China increased its gold holdings in the past, it bought domestically using renminbi, said Guan Tao, global chief economist at BOC International in Beijing. But this time, he said, the bank is using foreign currencies to buy gold — effectively reducing its exposure to the U.S. dollar and other currencies."
China is one of the largest foreign holders of US treasuries. It may be trying to gradually dump them while preserving the value of the bonds.
China's lack of highly liquid equity markets makes it an extremely potent breeding ground for bubbles. Combined with their cultural propensity to save instead of consuming and its easy to see how their real estate bubble happened. Chinese government is going to have to pay very close attention to any speculation possibilities if they dont start selling equity in state owned companies or at least make it much easier and safer to invest in foreign equities.
In the US, you could take 75% of your money allocated for savings and invest in an index fund and it would be a safe investment and probably make money. I don't think the average China consumer has access to that type of safe investment, or they don't trust financial institutions.
I don't really see a valid reason to invest in gold in the US vs index funds. It seemed more of a paranoia thing up until now. Now it is attracting BTC level of throw money in the hole. $84,500/kilo, which is about the size of a large phone.
Creating markets like this fueled the conflict in Sudan. At least one plane per day fly gold from Sudan to the UAE. The RSF leader made his fortune selling gold. Despite being a humanitarian basket case, Sudan produces over one ton of gold per week. https://archive.is/3ZT6v
Right thats what Im saying. Most chinese companies are state owned and can not be invested in. Foreign equities have the risk of running into a government crack down. Without good investment opportunities chinese investors are forced to turn to bad investments which become bubbles.
I have a family member who holds onto gold and silver currency because he believes the USD is going to collapse someday. I've raised the argument you made with him, and he admits that such currency won't be useful in the midst of the crisis. He believes it'll be useful in the rebuilding period afterwards, though. I guess time will tell.
That scenario could be made of very long stretch of times. Gold is a shelter value (or so was I told). Hard to use as a currency (you need to buy small parts that can be divided easily - coins or ingots) and hard to hide/protect.
Gold is completely valid form of preserving wealth. Massive USD devaluation results is skyrocketing prices of gold. Why people think this leads to a mad max world I don't know. If USD is worthless, it just means people will start using some other currency.
And you believe that in an economic crisis, people are going to want to buy these things?