Gold Is So Popular It's Making People Nervous | Hacker News Reader

Gold Is So Popular It's Making People Nervous

bloomberg.com

59 pointswalterbell83 comments

If you're thinking about buying gold, I would advise you to exercise caution. There have been a number of high profile articles like this one in the last week or so, and several of them came from people who stand to profit from you buying gold. As an example, this is one from Peter Schiff that came out Friday:

https://investorsobserver.com/news/3500-gold-means-life-in-a...

It turns out Peter Schiff owns SchiffGold, a large gold dealer. This guy is saying we all need to own gold due to economic turmoil, and then turns around and sells it by the ton.

Also, it's worth taking a look at the Gold/USD since 1970 on a log chart. The rate of increase we're seeing right now is not at all unusual, and it has gone through periods of much faster growth. From 1970-1980, it increased 3000% in only 10 years.

It's also worth noting that gold fell sharply in the days following the tariff announcements (6.66%, oddly enough) and then took off. The immediate reaction to economic news is typically smart money because they can estimate the longer term impact faster and price it in. The delayed reaction usually comes from dumb money.

Something just feels very off about this to me.

There's a long tradition of people talking up doom so they can market supplies to preppers. If those people get anywhere near power they will create the doom so they can fulfill their marketing.

On the other hand, as the Economist said, there's another 1300 days of this.

Well there's that, but also here's a ten-year graph of GOLD.AX.

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https://archive.ph/59b0S

BIS Basel III is scheduled for July 2025 in US, impacting paper vs physical gold.

HN ranking history for this thread, https://hnrankings.info/43809241/

Worldwide decoupling from USD? Where do we go from here?

Trade imbalances typically solve themselves because they force currency changes, if I have too many Y$ because I sell more to country Y than I buy then I can't use them easily and they become worth less, that means Y's exporters get more Y$ when they sell stuff and importers pay more - trade deficits balance out.

If you have a currency that's needed for something like buying a staple like oil from other than that country then that $$ is worth more, is artificially high, and that country will tend to always have trade deficits

It's very much a case of "you can't have your cake and eat it too" - it also means that Trump's tariffs are very much an incentive for the rest of the world to get off of the US oil $

thats the questions isnt it?

Euro or Yuan is my guess.

I'm inclined to say the Euro over the Yuan, if the US collpases then China is bound to follow. Their debts are tightly bound up together.

I think there's a option here: there could be no replacement. The fact of the world having a singular reserve currency is not guaranteed.

A totally possible outcome is nothing really replaces the dollar as the reserve currency, and international trade is just... less efficient because of it.

If the world moves away from the dollar, I think having a singular reserve currency replace it is probably the best case scenario

Agreed.

Yuan is too closely regulated to stay in China. I doubt it would be viable unless China first steps up their _attitude_ towards being a currency provider.

The EMU is an amalgamation of countries that barely hold together, have vastly different opinions on government spending, and isn't already a "world currency."

I do think we'll eventually have a single currency on the planet, but the question is what happens in my lifetime. And that's much less certain.

Sure, it’s possible that international trade would be less efficient. I think it’s more likely that liquidity providers / market makers would step in. These entities have gotten bigger and bigger over the past years.

nudge force push to dogecoin trumpbux etc

quick rich, scorched earth, whatever u can keep

China has pretty strict capital controls. Wouldn’t that more or less entirely disqualify Yuan?

Diversification?

There is no quick decoupling from the USD. Everyone holds long term USD instruments. Nobody wants to lose their money. The US is still the world's largest economy - by a lot.

Gold isn't that much more expensive than it was in e.g. 1980. It is pretty much just saying there's risk in other places at the moment and people are nervous. You should buy gold if your prediction is a complete collapse of economies along the lines of the great depression. I think this is extremely unlikely.

Short gold ;)

I've always wanted to get some physical gold just because it's so nice and shiny. But I'll wait for the price to go a little down. Maybe Costco selling gold bars is what's pushing up the price/demand?

If US economy collapses - and given the people who are now in charge, it doesn't feel all that unlikely anymore - this very economic dependency means that the crash will likely be global. On top of that, I think that it makes a major war that much more probable.

The nice thing about physical gold compared to just about everything else is that it has a non-zero bottom. You put money there not because you expect growth, but because you want to still be holding something once this is all over.

A bit longer term, investment in stock markets was the best thing to have value survive the last two world wars. During and directly after war, who would want gold. You want food/goods.

People who had gold (or expensive jewelry etc) and who were able to escape with it to less affected territories generally did pretty well.

Sources? Or assumption?

https://en.wikipedia.org/wiki/Executive_Order_6102

https://en.wikipedia.org/wiki/Executive_Order_6102#Similar_l...

I thought German stocks saw a haircut with WW2 but maybe I'm uninformed.

It’s going to be interesting to see how we would deal with international stock ownership once we are at war with previous partners. An example might be how stock ownership of Russian shares was dealt with in the west.

In general, looking at history, wealth stayed with the wealthy no matter what. Example study: http://blogs.wsj.com/economics/2016/05/19/the-wealthy-in-flo...

You seem to have confidence US stocks will not become worthless in a future war. Why?

Because most public companies have been surviving wars just fine so far in history? I also didn’t say anything about US stocks specifically. I consider it irrational to only invest in one geographic region.

It is simply a historical fact that nothing preserved value over time better than broad stock ownership. Not gold. It mostly carries psychological value.

The gold sovereigns I bought in 2012 are doing just fine, and have some useful tax advantages. Very shiny and surprisingly small.

(UK people: do not buy as investment any gold which will require you to pay VAT!)

After I got a divorce I was bored and melted down my wedding ring with a MAPP torch. Molten gold is simply beautiful. Liquid like mercury but shiny and glowing at the same time.

Anyway, ditto to everything you said. Fade the doomers who are calling for the collapse of the USD. There simply isn't an alternative. China won't give up the control as they would need to do to be the holder of the next reserve currency. The EU is a fractured joke of a union that can't be trusted to manage it either. The US continues to be the least bad option. We have deep markets to provide liquidity needed for the global economy. We still have, more or less, the rule of law and a system of checks and balances. The USD will eventually be replaced but it will likely take decades.

> Everyone holds long term USD instruments. Nobody wants to lose their money. The US is still the world's largest economy - by a lot.

Sure US share of world gdp is hovering around 25% for decades. But, world gdp share of what I would call US adjacent economies, like EU, JPN, UK etc., is decreasing with rise of chinese economy. US could comfortably run petrodollar and global reserve currency with the help of these adjacent economies by exporting US deficit, by forcing these adjacent economies to make concessions like plaza accords when running deficit dollar becomes tough.

China on the other hand is making moves to make maintaining deficit dollar impossible in long run, non-floating yuan, export dumping, belt road etc. We are running in to situation where deficit dollar and global economy decoupling could happen from both sides US and other countries. This is one way triffn dilemma could get resolved.

Gold is being bought by central banks around the world massively. The biggest buyers are China and Russia. The US weaponized the dollar during the Ukraine invasion and countries have taken the decision to lower their exposure.

Gold is likely in a structural bull market. It thrives in times of uncertainty and the world is far from certain.

Gold/M2SL(Billion USD) is currently around 0.12. In 1980, it peaked around 0.45. Monthly average since 1960 is 0.11. In late 2011 it peaked around 0.18.

Gold / Global M2 would be a better metric, but I haven't analyzed that yet.

It's the triangle thing: Quick, cheap, minimal side-effects, but you can pick at most two. There's loads of ways the world may do "quick" if we all find we have to, but it won't be good — and not just because of the various reasons why we might find we have to do it quick.

Pretty sure that's over.

> The US is still the world's largest economy - by a lot.

China is.

No reputable source has China gdp > US gdp. World Bank, IMF, UN all have it at something like $30T US, $20T China.

GDP (PPP) which is arguably a more meaningful metric for comparison.

https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)

No, it’s not. It’s just a different perspective. In some aspects it does reveals real economic power, but in other ways it can vastly exaggerate a country’s economic power.

Having hundreds of millions of poor near-subsistence farmers will add quite a lot to a country’s GDP (PPP), but does not make that country more powerful on the international stage.

I’d argue that PPP is more misleading than meaningful.you

Like, you can get an apartment built really cheaply in China. Yes, your money goes further there. But there’s also a much higher risk that the building is very low quality and will fall apart in a short time. And what’s more, you’re not actually buying and fully owning it. The land is leased from the government

> Having hundreds of millions of poor near-subsistence farmers will add quite a lot to a country’s GDP (PPP)

In what sense? By definition, subsistence farmers primarily produce for their own consumption rather than for the market, meaning their output is largely not captured in official GDP statistics.

Which argues that all metrics are useless, not that GPD (PPP) is best.

For a lot of things, yes; but — genuine Q because I'm not economically trained — on the question of dollar dominance in international trade… is PPP genuinely more relevant than nominal? I mean, this does seem to be a question about the currency itself?

Or should the question draw the boundary differently, and be asking about the size of the dollar economy rather than the US economy, with e.g. all international trade that is denominated in USD being counted?

Suppose China and the U.S. each produce 10 tons of steel. GDP PPP would consider both economies equally sized (and they arguably are), but nominal GDP would favor the U.S. because steel costs more there. GDP PPP is more useful if you want to compare standards of living or consider consider a country's ability to sustain a war for example.

That's the positive argument for PPP that I'm already aware of.

Thing is, to quote @YZF a way up chain: "There is no quick decoupling from the USD." — I'm curious about the dollar itself in this case, rather than about the goods.

China undercounts GDP by a lot and keeps their currency artificially low.

True but its only a matter of this at this rate.

Is it? China unlike US has a declining population. Also it takes a while to catch up even if you’re growing at 5% and your opponent at 3% when the starting base is much lower.

Of course this might be entirely moot since US is in the process of committing economic suicide for no apparent reason.

I think its going to happen. We keep underestimating China. US manufacturing is in the gutter. And it certainly doesn't help that we keep deporting our best minds back to China. They already have 5x the US population. They have a lot of room to grow still.

> US manufacturing is in the gutter

That had little effect on GDP growth, though.

It’s not like the gap has been narrowed that much in the last 15 years:

https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?location...

It’s not that long until China’s demographic issues will start having a huge impact.

Unless something significant changes it’s not inconceivable if China never catches up.

Obviously such longterm projections are semi meaningless but China will likely have less than 500 million people by the end of the century.

We go to BRICs.

A country sanctioned by half the world, a country with capital controls and non convertible currency, a country about to fight Pakistan, and whatever is going on with Brazil? That's not stability.

Not even BRICS countries would trust BRICS. There dollar is horrible, every other currency is much worse.

I assume you dropped this: /s

Probably nowhere. Despite what crypto maximalists, Sino-apologists or Eurofetishists will have you believe, there is nothing like the USD in terms of function. That isn't to say that gold won't go higher in USD terms or that USD won't further weaken against some other currencies, but we are still decades away from the end of king dollar.

As bad of a president as trump is, he will not destroy America. Things have been bad before, and they got better. We will see better times again.

Edit: And, yes, central banks have as of late been increasing gold reserves. Expect some of those gold reserves to be liquidated in the event that those countries currencies need support. Gold can have amazing periods like we've just witnesses and then just sit there for ten years. It's good for diversification though and from what I've heard from smarter people than me, something like 10% of your portfolio in gold isn't a terrible idea. Just DCA into it instead of panic buying at a potential top.

Oh and this is HN. Most of us have no clue when it comes to economics and are merely parroting our favorite twitter guru or Peter Zeihan. Trust us when we talk about software but take everything you hear in these economic related threads with a huge grain of salt.

> there is nothing like the USD in terms of function.

This might have been true 10 years ago but that's not the case today. I was in Chengdu last week and I paid at a store market with a TnG wallet using Malaysia MYR. Sure this is only South East Asia, but many countries now have their own ewallet thing and they can be ready in a short time to move.

How is that relevant? Countries don’t hold reserves in e-wallets. You don’t get a business loan in an e-wallet.

What you pay with as a consumer has nothing to do with the dollars reserve currency status.

One of the most important aspects of the dollars role is the “Eurodollar”, and how debt can be issued by international banks. There is no alternative to the dollar in that regard.

This is why it's best to avoid discussing economics on hackernews :D

"Only SE Asia" is you being modest here, SE Asia to Chengdu is like a quarter of all humans!

"Sure, the US has the largest GDP that's ever existed, but look at this cool SnapChat meme I can use to pay for street vendor trinkets from my smart ring! China is way ahead in those!"

> As bad of a president as trump is, he will not destroy America. Things have been bad before, and they got better. We will see better times again.

You sure about that? Lincoln almost managed it just by getting elected, given secession happened between election and inauguration.

I can't tell how bad Trump really is. If he's what he looks like, then he's purging anyone who won't butter up his ego. With that in mind: What would have happened if nobody had been willing to tell him it was a bad idea to open the northern California dams to solve the fire in Los Angeles, and they'd all been drained?

> What would have happened if nobody had been willing to tell him it was a bad idea to open the northern California dams to solve the fire in Los Angeles, and they'd all been drained?

You see this as an existential threat to the United States and the dollar's dominant role in world finance?

From what I've seen estimated, it would reduce US calorie production by something like 5-10%, dairy by 20%, vegetables by 60%, and nuts by 80%. The damage would last multiple years given what some of those crops are like.

Federal intervention would be required to avoid western states suffering food shortages, because the current logistics presume they can get it from CA.

Mishandling food could end the USA, never mind merely the dollar.

"For Want of a Nail", as the verse goes: https://en.wikipedia.org/wiki/For_Want_of_a_Nail

Markets are completely erratic at this point - everything points to frayed nerves. GDP numbers incoming. Gold a traditional safe haven but let’s be honest, people are buying “funds” of gold and driving up the price, not actually stockpiling the metal itself. Total chaos and I’m here for it. Self imposed pending collapse is breeding black swans that have yet to hatch. Source: worked at an investment bank during 2008 collapse.

> people are buying “funds” of gold and driving up the price, not actually stockpiling the metal itself.

Says you. A month ago I was trying to buy 1oz bars as gifts for my niece and nephew, from Costco of all places. They were often sold out by noon, sometimes queues for the stuff.

I wasn't even trying to buy something that was going to appreciate in value quickly, it's already gone up >10% from the Costco price at the time.

USD seems doomed right now, through the lens of the price of gold in USD.

Seems like the market is thinking this is man made so can be man fixed. Not the same systemic issues as we had with debt during 2008. Many businesses seems to be pretty healthy. AI still has ways to run in its bubble cycle- still huge investments into this space.

Really hard to predict. Confidence has eroded but emotions can switch very quickly to fear of missing the next rally.

Maybe a more fundamental question is what multiples are the new normal and where are interest rates going.

> let’s be honest, people are buying “funds” of gold and driving up the price, not actually stockpiling the metal itself.

Is there data or is this speculation? After the Gamestop saga, I would 100% believe that the gold market is being driven by a liquidity crunch as lots of random individuals buy gold bars to stuff in their sock drawers.

> people are buying “funds” of gold and driving up the price, not actually stockpiling the metal itself.

So, Gold NFTs?

Gold is cumbersome to handle and prone to inflation as more and more is mined. Just one example that recently caught my attention: Germany is currently discussing how to get back the part of their Gold reserves they have stored inside the USA. It is a pretty hard task. And afterwards it would be hard to use that Gold as a means of exchange, as it would have to be physically shipped around the world.

Bitcoin seems to solve all the problems the Dollar and Gold have as a reserve currency. It is independent of trade deficits, can be stored and transferred easily. Cannot be printed away.

What alternative future is there to Bitcoin becoming the new reserve currency?

1) > Cannot be printed away.

Why would any government want this a feature? As far as sovereigns are concerned, this is a bug, not a feature. You and I might or might not agree with it, but no sovereign government would give away its ability to print money.

2) Bitcoin has a public and transparent ledger. Why would any government want the whole world to see their reserve amounts and movements in real time?

> Why would any government want this a feature?

I'm not a sovereign and I don't want this feature either.

On an selfish/individual level it’s rational to prefer no inflation or even deflation if you have a lot of cash and no debt.

For the economy as a whole? Well it leads to a lot less debt amongst other things constant economic depressions (like back in the 1800s)

    no sovereign government would give
    away its ability to print money

Germany can print Dollars?

It can indirect influence the amount of dollars US is printing. e.g. having Euro interest rates at 0% or less would force the FED to lower them to some extent too.

How would a government get the ECB to lower interest rates? They could change spending and taxation to affect its own economy (increase/decrease inflation/growth employment) which can influence the ECB but that and any political pressure would face opposition from other governments, the markets and the ECB itself.

> Why would any government want this a feature?

As an issuer, they wouldn't. But nobody can issue Bitcoin anyway, so that's clearly irrelevant.

As a reserve, it would be the same ones who buy gold, for the same reason.

> What alternative future is there to Bitcoin becoming the new reserve currency?

Bitcoin not becoming the new reserve currency.

That's not what "reserve currency" means. A reserve currency is a currency which a country reasonably expects will be widely accepted in international trade, even in an economic crisis where other countries may not trust its own currency.

Bitcoin is ridiculously unsuitable and horrible as a currency, calling it that at this point is silly.

Also extreme price volatility make it not a great reserve asset.

I agree that on intrinsic characteristics, it makes more sense than gold. But most people do not even think about what 'money' is, and as with anything there's a lot of inertia in established practices. Esp. when a key aspect of money is salability, any alternative has a very steep hill to climb.

Gradually, then suddenly

Bitcoin is held in a ledger and need to be mined constantly. I do like Bitcoin but it is not comparable to Gold which is an offline asset.

It doesn't need to be mined constantly. In theory people could propose new blocks that don't create any new coins.

Nobody has enough certainty that Bitcoin is resilient against a determined state actor in case of war.

What type of attack do you envision?

Say country A trades goods with country B and they pay each other in Bitcoin.

Now what could country C do about it?

DDoS on Bitcoin via combination of a war chest of zero-days and physical destruction of internet infrastructure. Maybe combined with a takeover by spinning up enough of own miners.

The Dollar won't work without internet either. Unless you put dollar notes on a ship and send it across the ocean. But that is extremely slow and cumbersome. And having that ship shot down and the notes destroyed is even worse.

What do you mean by "takeover"?

Gold will work without the internet though.

> What do you mean by "takeover"?

I meant a 51% attack by a state actor.

Gold works without the internet but it is very slow and cumbersome to ship gold across the ocean to pay for goods.

Building out 51% of the world's hashrate is probably possible, especially for a country like the USA who already has something like 40%. But it is still much harder than to just press a button and deny other countries to use the Dollar.

Bitcoin has too much volatility right now. Maybe that will change one day.

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