The price of gold has been on a roll this year. The yellow metal has rallied at a greater pace than the stock market in the past year, which isn’t surprising as investors have been putting their money into equities instead of gold to protect their capital.
According to a Goldman Sachs report, it has now emerged that the rich have been busy buying physical gold, indicating that they are readying themselves for an apocalyptic scenario.
Gold was used as currency before paper notes came into circulation. But the problem with paper currency is that it can now be manipulated as it is no more tied to the value of the yellow metal as was the case originally.
By printing more notes, the value of the currency in your hand goes down. And then again, there are times when the banks might put a restriction on the amount of your own money that you may withdraw.
So in a post-apocalyptic world when there are no banks and no governments to set the value of currencies in circulation today, bullion is once again expected to show its worth as a store of value. This is probably the reason why the rich have been storing gold despite the impressive stock market rally this year, which would have multiplied their wealth to a greater degree.
The Goldman Sachs report points out that the rich have been hoarding the yellow metal in a non-transparent manner. That is evident from the fact that the amount of gold in storage has increased at a far greater pace than gold-based financial instruments such as exchange-traded funds clearly indicates that the rich prefer physical gold instead of buying instruments that could be held by third parties.
And as we have already seen that banks could put restrictions on cash withdrawals, it won’t be surprising to see them put a hold on withdrawing bullion from lockers. This means that the rich are probably hiding all that gold in their luxurious bunkers, demand for which, according to CNN, is growing at a fast pace.
While common people may not be able to build their own luxurious secret shelters, they can indeed benefit from the apocalyptic fear of the rich. That’s because physical purchases of gold could send the price of the yellow metal to $1,600 an ounce over the next year, according to Goldman Sachs.
That would be a nice jump over the current gold price of around $1,460 an ounce. On the other hand, the Federal Reserve is expected to maintain a low-interest-rate environment, and that gives buyers more reasons to buy gold. In a high-interest rate scenario, it makes sense to buy treasuries as they yield a higher return.
But as the Fed has been reducing rates and because it doesn’t seem to be in a mood to raise the same, the Treasuries won’t yield any major returns. Buying gold is a good idea in such a scenario given its safe-haven nature, and also the increasing demand for physical gold that’s being driven by the super-rich who are stacking it up in their secret bunkers.
Last modified: September 23, 2020 1:23 PM