Of course there are geopolitical reasons to explain this buying movement towards gold, accompanied by a depreciation of the US dollar. But there are also arguments that are only based on the entry of fresh money in the heat of increases that can saturate prices and distort them.
Until recently, the demand for Gold was driven by central banks, jewelry and other industries that take advantage of the benefits of the precious metal. But in the last two years, individual investors have joined in who not only buy gold directly (remember that some sales were made in vending machines in luxury hotels) but also participate in its promotion through exchange-traded funds (ETFs) that replicate the movements of gold and that not infrequently do so directly with physical acquisition.
This same week, an investment firm pointed out that gold’s current levels of around $5,000 (after a logical collection of profits) would go higher because large institutional investors had yet to enter this market. That is, demand would be the only justification for its expected bullish behavior. Although less frequent, other materials are also offered to the individual saver. The price of cocoa last year undoubtedly also attracted interest.
Another example not too distant in time is the evolution of bitcoin, which capitalizes 1.8 trillion dollars and covers half of the total value of cryptocurrencies. It shares with gold an aspect criticized by the Oracle of Omaha, Warren Buffett: they are assets that do not generate income, unlike stocks (dividends) or bonds (coupons). Its success lies in its scarcityand in the case of gold in its usefulness, while bitcoin is computer security left for the world.
The takeoff of Bitcoin – despite its high volatility – also coincided with the approval by the US Administration of the creation of ETFs that acquired or replicated this cryptocurrency. Added to this is the ease and speed of operating with these products through contracting platforms. But far from a clear economic argument, it is again the opening of these assets to new investors that led to the bullish climb when it exceeded $100,000 per cryptocurrency.
Another striking case has been the authorization of individual investors to participate in venture capital funds. The authorities and supervisors were reluctant, but finally agreed to make this product with little liquidity, obvious risks and focused on the long term, within the reach of the most modest pockets. Again, inflows of money flow that must go to the business market – listed and unlisted – without much clarity in the distribution of dividends.
Both in the case of gold and bitcoin It is impossible to make a calculation on the PER of that investment as it lacks periodic returns. so it is a chimera to know the years in which the investment is recovered by maintaining those products. And the case of venture capital is usually marked by failed operations (especially in those that operate as business angels) that are often compensated with a great success story.
In the stock markets and in the bonds, despite the difficulty of getting the sales rightit is possible to know at a specific moment if the shares are expensive or cheap, and to receive dividends or share repurchases that in the first case will increase the investor’s current account, and in the second will improve the ratios of the shares that are on the market. There, it will be easier to make purchase and sale decisions, as with bonds with their profitability (coupon) and their relationship with the interest rate movements that the central banks of the different economies decide at a time.
Being cautious with gold and bitcoin sound, today, like old wives scares. But it wouldn’t hurt to think about the reasons for his promotion.