What record gold prices actually reveal: experts

But what makes this a milestone is that the famous Hollywood gold bricks, which weigh more than 27 pounds (400 troy ounces, to be exact) are now worth $1 million a piece.

People love round numbers, especially big round numbers with six zeros, so the number catches the eye of the public, even though most people will never buy the thing the price represents.

Anyway, we have a new way to visualize a million dollars as a physical asset: these yachts, these houses, and now this gold bar.

As iconic and influential as the format (known in the industry as London Good Delivery Bars) is, private buyers tend to opt for smaller units such as kilo, 100 gram or one ounce offerings.

More than collectors snapping up bars and coins at Costco, gold experts told Business Insider that the real force pushing prices to new highs is central bankers around the world. The prospect of interest rate cuts – which are around the corner in the US – generally boosts gold as it reduces the relative attractiveness of other assets such as Treasurys.

“I can tell you that FOMO has not yet infiltrated the bullion market as you would expect given the $2,000 to $2,500 range,” said Jonathan Da Silva, a trader at Kitco Metals, in an email. .

And even with gold’s popularity in the US, physical gold is enjoying even stronger interest among non-Western consumers, according to Stephen Flood, director and co-founder of GoldCore, a precious metals services company headquartered in Ireland.

But experts tell Business Insider there’s another side to the trend.

“Demand is increasing, but coins are more degraded,” Flood said.

Considered a “safe haven” asset, the cash price of gold also rises when the real value of currencies including the US dollar, British pound and euro falls. In other words, rising gold prices are another way to see the dollar’s purchasing power declining.

The value of a currency can decrease for many reasons, mainly due to inflation, but also geopolitical risks and the desire of other countries to hold it in reserves.

The dollar has slipped from representing more than 70 percent of the world’s reserve currency in 2000 to less than 60 percent today, while gold reserves have risen sharply since the Great Financial Crisis of 2008, according to the International Monetary Fund.

Owning physical gold is a way to protect wealth from currency devaluation without the risk of investing in other financial instruments, said Jacob Diaz, CFO of Genesis Gold Group.

“As long as there is room for the dollar to fall in value, there is room for gold to rise in value,” he added.

Indeed, six years ago, a million dollars would get you two Good Delivery gold bars.

Meanwhile, despite gold’s unusually strong performance this year, experts BI spoke to said long-term investors were far more concerned with protecting their wealth against downside risk.

High-net-worth bullion buyers (those who might buy a 400 troy ounce bar) “are looking to exit fiat rather than make more of it,” Da Silva said.

“They may look at gold as a means of preserving the value of their life’s work for future generations,” he added.