'You can't sell it': Fund manager explains why gold may trap investors if US economy collapses
Hedge fund manager and financial educator Akshat Shrivastava on Wednesday questioned gold’s true safety in a hypothetical US economic collapse, warning that the precious metal might not be the ultimate escape investors imagine it to be.
“You are holding gold. But, here is a situation in which you can’t sell it,” Shrivastava wrote in a social media post, exploring a scenario where the US economy goes under. “Let’s say US economy goes under. 38Tr$ of debt gets written off (total debt of the US). Gold right now is about 30Tr$ in market cap. People rush to buy even more gold: gold 2X = market cap now 60Tr$. Everyone wants to buy gold. But, no one wants to sell it.”
Shrivastava explained that if fiat money collapses and global investors rush into gold, the market could freeze due to a lack of counter-buyers. “From 100 units of FIAT dollar = we moved into 100 units of Gold. Now people realize: oh, let me book my profits. Who do you sell it to? [Remember: people are looking to buy gold, not sell it],” he said.
He then questioned whether any institutional counterparty could absorb such selling pressure in that situation. “So who is the counter-buyer? Pension funds? Hedge Funds? No. They have gone under. Governments? maybe. They will launch a variant of SGB scheme, saying: you give us your gold, and take this X units of INR/USD,” he wrote, suggesting that governments could reintroduce fiat exchange systems to restore liquidity. “You are back to square one: ‘BUY GOLD WITH FIAT money (fiat money is worthless).'”
Challenging a common perception, Shrivastava concluded that “the real competition of USD is not Gold, as people are telling you. The real competition of USD is other FIAT currencies (like INR, Japanese Yen etc). For gold to rise, other asset classes need to rise too.”
His remarks come amid renewed market interest in gold and silver after last week’s sharp correction.
Gold and silver rebounded on Monday as investors and jewellers stepped in at lower levels ahead of Diwali and the wedding season. On the Multi Commodity Exchange (MCX), gold futures for December delivery climbed Rs 3,580, or 2.82%, to Rs 1,30,588 per 10 grams. The yellow metal had earlier touched an all-time high of Rs 1,32,294 before correcting to Rs 1,27,008.
Silver also rebounded, rising Rs 1,571, or 1%, to Rs 1,58,175 per kilogram after losing nearly 6% the previous week. Analysts said the recovery signals renewed appetite for safe-haven assets amid global economic uncertainty, even as easing trade tensions and expectations of a US rate cut help temper volatility.