The world gold price exceeding the 4,000 USD/ounce mark is making the world "weary" in delusion about the eternal value of this precious metal. But according to economist Willem Buiter, former member of the Bank of England monetary policy committee and former global chief economist of Citigroup, this is just a 6,000-year-old "golden ball" that central banks should get rid of as soon as possible.
The world is a Prisoner of history as it continues to view gold as a store of value, Willem Buiter wrote in the Financial Times. He said that the current gold price - which has increased by more than 50% since the beginning of the year, surpassing the threshold of 4,000 USD/ounce - does not reflect the real value of this metal, which is "nearly zero".
Buiter first called gold a 6,000-year-old bulb in 2009, when the new gold price was at $1,109/ounce. 16 years later, he still maintains the view that gold has no intrinsic value, only surviving thanks to historical beliefs and investment habits.
The former global chief economist of Citigroup believes that gold and Bitcoin have many things in common: they are volatile, unyielding, and inflated as safe havens. Bitcoin fell 74% in 2022, while gold also lost 44% of its value at times (2011-2015).
Bitcoin can at least be used as a means of digital payment; gold is not, he said, stressing that central banks continuing to reserve gold is an unreasonable act in the era of digital currencies, stablecoin and instant payment systems.
Buiter pointed out a paradox: Gold is exploited underground at a huge cost, then buried in an equally expensive underground warehouse. According to the World Gold Council (WGC), the average production cost is about 1,500 USD/ounce, while the total exploitable reserves are more than 54,000 tons.
The only reasonable economic strategy is to keep gold grounded, he wrote mockingly: We are wasting resources and energy just to maintain a collective illusion.
Since 2022, central banks have added more than 1,000 tonnes of gold per year, raising the share of gold in global foreign exchange reserves to 20% - higher than the euro (16%). This, Mr. Buiter said, only increases the risk of concentration and makes the global financial system dependent on an undervaluable commodity.
No central bank should invest in a single physical asset, especially one with zero intrinsic value like gold, he warned.
According to Mr. Buiter, central banks should take advantage of this upcoming "golden bubble" opportunity to sell as much as possible - transfer that amount of gold to individual investors ready to " all- out of- sight" when the bubble bursts.
Gold is not belief, it is hallucination. And that illusion is at its highest price in history, he warned.
Some large gold businesses in Vietnam also warn that although gold prices may continue to increase strongly due to increased safe-haven demand, there are also warnings about the risk of adjustment if the US Federal Reserve (Fed) does not cut interest rates as expected or if US economic data is unexpectedly strong.
Meanwhile, the world gold price at 11:03 (Vietnam time) on October 20 still maintained an upward trend, trading at 4,266.02 USD/ounce.
As of 10:07 on October 20, the domestic price of SJC gold bars was trading around 151 - 151.5 million VND/tael (buy - sell).
Bao Tin Minh Chau's 9999 gold ring price is trading around 155.5 - 158.5 million VND/tael (buy - sell).
