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Ugh, why is it always the weirdos who do so well.
First it was the bitcoin bros and their Lamborghinis, now it’s the gold bugs sitting on top of their hoards and cackling with glee.
The price of gold has gone through the roof recently, as the next chart shows.
We are out here breaking our backs to make a dollar and they have doubled their money by owning metal
The gold forums are full of boasting.
“Got back into gold when it was $1700 to $1800 an ounce and I had friends saying ‘you’re nuts to buy at $1700 that’s way too high!’,” one said on Reddit’s gold forum.
The profits the goldbugs are making are huge.
You can buy gold online and have someone store it for you. But people who are into gold tend not to trust anyone.
For them there’s no substitute for having the actual precious metal at home. They buy tiny little bars of it.
Much smaller than a Mars bar, and much heavier.
(If you had a Mars bar size bar of gold, even one of the new small shrinkflation ones, the gold would weigh almost half a kilogram and be worth about $100,000.)
They buy a safe to put it in. Then they open the safe and admire it.
“Something about a lump of gold that is so aesthetically pleasing,” they say.
The nerds who like to hoard gold are disproportionately likely to be doomsday preppers.
Many also keep a large supply of tinned beans and bottled water and fantasise about how useful gold will be after civilisation collapses.
After all, that’s why gold has risen recently. Gold goes up when the world looks unstable.
And thanks to Donald Trump’s reign of confusion, the world is more unstable now than it has been in a long time.
Even during the pandemic gold didn’t rise this much. People are getting nervous about traditional assets like stocks and bonds, and they are buying gold instead.
In fact, some people are calling it the “signal tells us that investors may be starting to lose confidence in big US companies”.
The ratio of gold to stocks has just bottomed out, and that is something that has happened only three times in the last century – 1929, 1966 and 2000.
This is actually good news for Australia, as we have more gold miners and fewer of the big tech stocks that have outperformed in the last 20 years.
More neckbeards in Porsches
There’s worse news too.
For a little while there Gold and Bitcoin were doing opposite things, gold was up while Bitcoin was down.
But in just the last month, Bitcoin has bounced back. Now both kinds of investment nerds are making a killing. It’s enough to make you weep.
Especially since your superannuation has probably been falling recently. Mine is down so much since Christmas I can barely even look at it.
The Australian stock market had a nice start to the financial year but recently retraced all those gains and went back to around where it started.
As the next chart shows, Bitcoin has outpaced stocks this financial year, by a lot.
The big picture
The global financial system depends on safe assets. For a long time the US dollar was king.
Everyone wanted to own US dollars, and when they owned them, they put those dollars into US government bonds.
Bonds are IOUs. A promise to pay you back.
This promise was backed by the biggest most powerful government in the world, backed by the biggest nuclear arsenal and backed the biggest richest economy.
US bonds were a safe haven to end all safe havens.
It is not people like us who own bonds, not directly. It’s the big money funds.
Japanese retirement funds used to just casually buy $10b worth of US bonds. American retirement funds too.
Sovereign wealth funds from rich oil producing countries as well.
The kind of places that have to manage hundreds of billions of dollars deal in bonds. That’s why the US bond market has a trillion dollars in daily turnover.
Absolutely crazy amounts of money move through it.
But US bonds are suddenly out of fashion. People are selling them off because the idea that once looked crazy – that America can’t be relied on – is now plausible. The safe haven seems less safe now.
“The haven status … is increasingly in question,” said one bond market expert quoted in the Wall Street Journal.
If you can’t rely on America, at least you can rely on the laws of chemistry. Gold does not easily react with anything because of its atomic properties.
It doesn’t rust, it doesn’t fade, it doesn’t dissolve in water.
It gleams quite nicely and is worth a startling $180 per gram.
It has been a wonderful investment for those who were sceptical of Donald Trump and sceptical of America.
The rest of us just need to hope that, somehow civilisation doesn’t actually come crashing down.
It’d be a very optimistic sign if the price of gold were to fall again.
Jason Murphy is an economist | @. He is the author of the book Incentivology
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