Keith weiner writes “Price is set at the margin. We have covered several times Warren Buffet’s pointed (and disingenuous) comment that gold has no utility. It just sits, and there is a cost for it to sit. And an opportunity cost.
So why do people buy something which has no utility and no return? One, which we discuss a lot, is speculation. They buy whatever is going up, in an attempt to cash in on the rise. So let’s not dwell on this.
A second reason is fear of counterparty default. Third, is gold is a non-expiring hedge for monetary collapse and/or a currency regime change. This is a broader version of simple counterparty default.
Right now, General Electric is in the news. Its investment grade rated bonds are trading like junk bonds. This is like an echo from the past. Bear Sterns retained its investment-grade rating until just before its demise and GE is not alone
Keith raises the issue of price being set at the margin to make a point. In this scenario, the marginal buyer of gold will not be the speculator. It will be the mainstream investor who is desperate to protect himself from a financial system going mad again. When will this happen? Watch for news of GE and other major debtors sinking deeper into trouble.
As to systemic default risk, i.e. monetary collapse, it is early yet. https://acting-man.com/?p=53799