Sovereign funds / private wealth purchase gold as a hedge against inflation. Ie their short term cash (actual cash) being worth less tomorrow. It has this characteristic because gold fundamentally has zero yield.
When you enter a crisis period or period of deflation. Which we are seeing now. There is a flight to short term cash (USD).
Good bugs who hoard gold or draw parallels to Armageddon and huge price increases in gold do not account for the simple fact that gold is long term cash.
During the GFC the same liquidation profile was observed for gold.
In some ways, gold is the only real money. Governments have been secretly taxing their citizens by forcing them to use the gov't issued currency while printing more of it. Savers lose value in this process to finance short term needs.
You can't print gold. Even when gold prices wildly fluctuate, gold production doesn't b/c it's already so hard. In times like now, we're going to print lots of USD in one way or another.
Is there a gov't issued currency that's held its price better than gold?
My first job was at a mining startup that found perhaps the best copper/gold discovery in a decade. We were ultimately acquired. It's a reality. Mines take a minimum of ten years from discovery to bring into production. This is without the typical roadblocks of political/environmental/management/technical showstoppers.
Gold has long been thought of a long-term store of value for this exact reason. Governments cannot help themselves, particularly democratic ones, from following a path of unfunded austerity. It becomes the power cycle, at some point there is a financial reckoning, and citizens' wealth is destroyed.
Then the cycle begins all over again, usually tied to a metal (like gold) before breaking into fiat when the unfunded liabilities exceed the ability of the country to fund them.
US dollars are the best among the worst in fiat. That will change, as it always has historically. Gold will remain as a store of value, as it always has.
The assessment I came to was that gold is a store of wealth, not a currency or investment. It's a way of preserving, not creating wealth. It's what could be passed on to your offspring along with land that holds its value, more or less, over generations.
It damn sure isn't the FRN. If you held on to one of those from 1920ish, you'd have about maybe 3-4% of its worth in terms of buying power (of staples like eggs, bread etc)
Money and currency are for spending to get things of actual value, whatever those things may be.
There are apocryphal stories about Jews in WW2 Germany who had all their wealth in gold (as was common back then) who used the malleability of gold to flatten it out in very thin sheets then make thread from that, then sewed the threads into their clothing so that their wealth wouldn't be confiscated when they were fleeing the Nazis. I don't have any citations, though.
Sovereign funds / private wealth purchase gold as a hedge against inflation. Ie their short term cash (actual cash) being worth less tomorrow. It has this characteristic because gold fundamentally has zero yield.
When you enter a crisis period or period of deflation. Which we are seeing now. There is a flight to short term cash (USD).
Good bugs who hoard gold or draw parallels to Armageddon and huge price increases in gold do not account for the simple fact that gold is long term cash.
During the GFC the same liquidation profile was observed for gold.