The Rich Are Buying Physical Gold Bullion in Preparation for Recession
The rich are buying physical gold bullion, coins, and bars, according to Goldman Sachs.
“I think gold’s going to $2,500, $3,000 an ounce in the 2020s because the climate—the landscape for gold is so hugely supportive.” Paul Schatz, Heritage Capital president, told Yahoo Finance’s On The Move. Goldman predicted $1,600 gold by 2020.
“I think Goldman is way off here,” Schatz said. “$1,600 is going to be a footnote.”
Goldman Sachs points to recession concerns and political uncertainty as catalysts for an investor to run to gold.
In the last year alone, gold prices rose nearly 20% with gold on pace for its best year in a decade. Goldman believes the gold price will reach
People are buying gold bullion, not just gold ETFs.“Physical gold seems to really be in… and basically it sounds like rich people are hoarding physical gold, the bullion itself,” said Yahoo Finance’s Myles Udland. In Goldman’s “view that squares with demand for vaults and everything. But I just think end of the world trades are fun, and it seems like the global rich want the actual thing.”
Schatz says “an individual investor should have 5% to 10% in some capacity in precious metals. People who don’t trust the markets, don’t trust paper will want to buy gold coins. Anything that they’re comfortable. You want to buy gold stocks? Fine. You want to buy GLD? Fine. You want to buy gold coins? Fine.”
In the past year, gold prices have increased approximately 20%. Gold is on pace for its best year since 2010.
“Since the end of 2016 the implied build in non-transparent gold investment has been much larger than the build in visible gold ETFs,”wrote Goldman Sachs.
Goldman Sachs also notes that vault demand is surging globally. “Political risks, in our view, help explain this because if an individual is trying to minimize the risks of sanctions or wealth taxes, then buying physical gold bars and storing them in a vault, where it is more difficult for governments to reach them, makes sense.”
The firm adds: “Finally, this build can also reflect hedges by global high net worth individuals against tail economic and political risk scenarios in which they do not want to have any financial entity intermediating their gold positions due to the counter-party credit risk involved.”
Buying gold isn’t the only thing the rich are doing to prepare for an economic crisis. In 2017, journalist Evan Osnos’ wrote a story in New Yorker chronicling efforts to prepare luxurious armageddon hideaways.
“A lot of my friends do the guns and the motorcycles and the gold coins. That’s not too rare anymore.”