Here’s a detailed breakdown of the commentary from a fund manager about why owning gold in the event of a U.S. economic collapse may not be the safe haven many expect — along with the implications, caveats and what it means for investors.
📰 What was said
According to an article in Business Today, hedge fund manager and financial educator Akshat Shrivastava warns that if the U.S. economy collapses, owning physical gold could become a trap for investors. (Business Today)
Key quotes:
“You are holding gold. But, here is a situation in which you can’t sell it.” (Business Today)
“Let’s say U.S. economy goes under. 38 Tr$ of debt gets written off … Gold right now is about 30 Tr$ in market cap. People rush to buy even more gold: gold 2X = market cap now 60 Tr$ … Everyone wants to buy gold. But, no one wants to sell it.” (Business Today)
Shrivastava’s argument is that in a collapse scenario:
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The U.S. might default or write off large debt. (Business Today)
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Gold market cap is relatively small compared to that scale of money involved (he cites ~$30 trillion). (Business Today)
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If everyone rushes into gold, who will be the buyer when you want to sell? He argues there may be a “liquidity trap” for gold. (Business Today)
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He also states: “The real competition of USD is not Gold … The real competition of USD is other fiat currencies (like INR, Japanese Yen etc).” (Business Today)
🔍 Why this is an important warning
Here are the underlying themes and why they matter:
1. Liquidity risk in extreme stress
Even assets thought to be safe can suffer severe liquidity constraints when markets crash. If everyone wants to hold gold and nobody wants to sell, an investor trying to exit may find no willing buyer at a reasonable price.
2. Scale and relativity
Shrivastava points out that if the U.S. economy collapses (and large‐scale debt is written off), the size of “capital flight” into safe assets could vastly exceed the normal gold market’s capacity to absorb. That creates a structural imbalance.
3. The nature of safe havens changes under collapse
Usually gold thrives when confidence erodes, currencies weaken, inflation rises, or the system is stressed. But if the very system (including fiat money, trade, financial infrastructure) is breaking down, the usual mechanics of “safe‐asset” may not work.
4. The assumption of saleability
Much of investing in gold (or any illiquid asset) is based on the assumption you’ll be able to sell when you want or need to. In collapse scenarios, that assumption may fail.
5. The overshadowing of other risks
Shrivastava’s remark that gold is not the real competition to the USD suggests that in his view, relative currency weakness (e.g., other fiat currencies) may be more likely than a pure gold takeover. So, gold as “escape” might under‐perform.
⚠️ Important caveats and context
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Shrivastava’s scenario is extreme: a collapse of the U.S. economy, massive debt write-off. It is a what-if rather than a baseline scenario.
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Gold still has a long track record as a hedge in many crises. Many analysts still recommend holding some gold for diversification.
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Liquidity risk does not mean gold will go to zero; it means you may face large spreads, difficulty in selling, or forced sale at poor prices.
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Past behaviour ≠ future guarantee. Every crisis is different, with different players, assets and responses.
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The article refers to market cap of gold at ~$30 trillion (Shrivastava’s figure). That figure may differ depending on how you define “gold market cap” (physical, ETFs, derivatives).
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Even if gold faces limitations in a full collapse, for many more “normal” stress scenarios (inflation, currency weakness, regional crises) it may still perform well.
🎯 Implications for investors
Based on this viewpoint, here are considerations for investors:
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Don’t treat gold as bulletproof: If you’re buying gold purely as “ultimate safe haven”, be aware of the limitations.
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Assess liquidity and exit strategy: If you need access to cash or prefer assets you know you can sell, then highly illiquid or niche holdings may be riskier than thought.
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Diversify the form of safe‐assets: Gold is one tool — but cash, short‐term government bonds, diversified assets, alternative store‐values (real assets, perhaps even non-traditional) may also play roles.
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Recognise risk levels and timeframe: If you believe in the extreme collapse scenario, you might allocate differently (and accept higher risk/reward). If you see more moderate risk, gold may still be useful but not as “all insurance”.
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Consider price and fundamentals: If gold is already very elevated (as some articles indicate; e.g., nearly 8% drop in 48 hours) then the margin of safety is narrower. (The Economic Times)
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Monitor macro triggers: If you believe the scenario of collapse is plausible, watch indicators like sovereign debt growth, central bank actions, currency devaluation, geopolitical shocks. These may impact how safe haven assets behave.
🔮 My view
I find Shrivastava’s warning thoughtful and valuable — it highlights a blind-spot that many gold “bugs” may ignore: What happens when the system itself breaks, not just falters? In that context, assumptions of saleability and liquidity may fail.
However, I wouldn’t interpret this to mean “don’t own gold at all”. Rather: own it with awareness. If your downside scenario is moderate (inflation, regional crisis, currency weakness) then gold remains a decent hedge. If your downside scenario is catastrophic (U.S. economic collapse, global financial system failure), then relying solely on gold might be insufficient and could even trap you.
In short: gold is part of the toolkit, not the entire armoury.
If you like, I can pull up historical data of what happened to gold (and its liquidity) in past extreme crisis scenarios (e.g., late 2008, 1970s, hyperinflations) and show how well it really sold and held value. Would that be useful?
