Former Citi Chief Economist Willem Buiter Calls Gold a “6,000-Year Bubble,” Urges Central Banks to Sell

Willem Buiter, the former Chief Economist at Citi and a former member of the Bank of England's Monetary Policy Committee, has reiterated his long-held view that gold's valuation constitutes a "6,000-year-old bubble." Speaking on the @bitsandbips podcast hosted by Laura Shin, Buiter argued that central banks should divest their gold reserves, emphasizing the metal's negligible intrinsic value. His remarks come as gold prices have surged, trading above $4,000 an ounce, a more than 50% increase since the beginning of the year.

Buiter highlighted that despite gold's historical role, its current price is primarily driven by collective belief rather than practical utility. Of the approximately 216,265 tonnes of above-ground gold by the end of 2024, only about 15% is used in technology or industry, with the majority held as jewelry (45%), investment bars/ETFs (22%), and central bank reserves (17%). He described gold as a "fiat commodity" whose value, like fiat currencies, relies on shared belief.

Drawing parallels, Buiter compared gold to Bitcoin, noting similarities in their volatility and lack of intrinsic value. However, he maintained that Bitcoin "still isn’t money" and questioned its utility as a means of payment compared to digital currencies. He suggested that while Bitcoin's supply is capped, new, identical replicas could theoretically be created by skilled cryptographers.

Looking to the future of finance, Buiter expressed optimism for Central Bank Digital Currencies (CBDCs) and fully backed stablecoins. He believes these digital assets "may win the future" due to their potential as efficient means of payment. The economist also discussed the implications of tokenized deposits, exploring whether they represent a breakthrough or a threat to the existing monetary system.