Gold is the New Toilet Paper

Forget squeezable Charmin, where’s the gold?

The Wall Street Journal reports that two groups –survivalists seeking tangible wealth to use as barter when their ammunition runs out and investors seeking inflation protection – are threatening to make gold bars as scarce as Clorox wipes. Ability to supply bullion has been reduced by the COVID-19 crisis.

“When people think they can’t get something," says a gold trader, "they want it even more.”

Gold Is A Dumb Investment

Warren Buffett, in his letter to Berkshire-Hathaway shareholders:

Today the world’s gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce – gold’s price as I write this – its value would be $9.6 trillion. Call this cube pile A. 

Let’s now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world’s most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B?

But . . .
The cost of a year at Yale College – tuition, room and board – is roughly the same as it was a century ago when measured in gold.

Interesting, though the chart doesn't disprove Buffett's point. If you had put your year-at-Yale money into farmland and Standard Oil a century ago, you could probably fund an entire Ivy League education today.

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Update: Christopher Goolgasian of State Street, speaking up on behalf of SPDR Gold Trust, says the Oracle of Omaha is wrong about gold's investment value.

"While he won’t own gold, he also never owned Apple (up around 1,500% since January of 2000) or Google (up 530% since August of 2004),” Goolgasian said of Buffett.

(Nothing gladdens the hearts of those of us who bought Apple cheap more than reminders of those who didn't.)

Tea Party Gold Rush

GOLD NUGGETS FROM ARIZONA
Photo via Wikimedia Commons

Think of gold as the Tea Party of investments, advises the NY Times. But don't fall for the notion that gold is hitting new highs. David Leonhardt reminds you to allow for inflation:

"The actual record was set 30 years ago, when the price of gold, in today’s dollars, hit $2,387, or 71 percent higher than it closed on Tuesday. "

Does this mean the gold boom still has a ways to go? Or will investors end up tumbling out of their "24-karat safety net"?