Gold is near a four-week high as concerns for the health of the global economy push investors into safe-havens assets. But one investor says the precious metal is overpriced.
“Ask someone what gold is worth and the answer will now be: what someone will pay,” Peter Toogood, head of investment at Old Broad Street Research, said.. “That is the reality of gold today.”
More than 50 percent of gold purchases come from exchange traded funds-related investment demand, Toogood said.
“It has nothing to do with fabrication or usage of gold. It is storing it in a vault,” he said.
Another argument against buying the precious metal is that it has no scarcity value, Toogood added.. Unlike a rare piece of art, gold is in plentiful supply.
“I think the point being in a capitalist system, (a Picasso) is given a value for a reason, (it) has scarcity value. Gold has none. You can get it out of the ground,” he said.
There are also concerns about liquidity, he said.
“There are pawn shops you can go to," he said. "Send it in the post apparently and they will give you some cash for it. Oh my gosh, how much more bubbly do we want to get?"
Toogood also gave some guidelines on how to give value to a product, and how to define worth.
“Something that gives you a yield for a starting point. For me, that is one way you can define value,” he said.. “Secondly gold has no linearity. Linearity and yield. Gold doesn’t have either of those.”
Even the aesthetic value of gold is no reason to buy, according to Toogood.
“People liked tulips once as well. Good luck to them,” he said.