WHAT’s UP GOLD ?
Buffett, with all his wizardly wisdom of the financial markets, has never been a fan of gold. His most famous quote on gold: “Gold gets dug out of the ground, and then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”
The other argument is the impact of the frenzied gold buying by most of the banks across the world, to neutralize (bluntly- get rid of) their investments in US assets, which again are valued in US Dollars, which in turn is plummeting. Our own RBI’s (Reserve Bank of India) recent surprising move, of buying 200 tonnes of gold from the IMF (International Monetary Fund) is a good example to this argument.
Price rise in general, has been on an average of 3% a year, for the past 10 years, while Gold has gone up 17%. A highly unsustainable model in an unstable economy. In fact, the high gold price has led to a plunge in gold jewellery sales and gold demand in countries like India and China, two of the largest consumers of the yellow metal in the world.
There was a time, not very long ago, when people were convinced that investment in real estate would never be a risk. Today, in the USA, more than 30% of their faith in real estate has already been wiped out, while back home in India, the bell curve is staring down its descent slope.