Your numbers are badly off. Jewelry is the use referred to when Krugman says "you can use it to make pretty things". (Gold in industrial use is generally invisible).
Gold isn't used in jewelry because it's expensive. It's used because it's pretty, it's soft and workable, and it doesn't tarnish. And it's gentler to your skin; my sister's ears are too sensitive to wear cheap nickel earrings.
Now, I agree with you that the statement you quote from Krugman is invalid. But there's no reason to go around interpreting him as saying something wildly different than what he said. Gold bars are a store of value. Jewelry is not.
You misunderstand me. I know he is talking about jewelry. My point is that people are buying gold jewelry mostly because it is expensive. Yes gold has certain properties, but there are other precious metals with similar properties (platinum, etc). So given the choice between similar metals with similar properties, people will tend to use the most expensive one for jewelry.
In other words, Krugman's argument is circular (gold has value because it has value).
Gold isn't used in jewelry because it's expensive. It's used because it's pretty, it's soft and workable, and it doesn't tarnish. And it's gentler to your skin; my sister's ears are too sensitive to wear cheap nickel earrings.
Now, I agree with you that the statement you quote from Krugman is invalid. But there's no reason to go around interpreting him as saying something wildly different than what he said. Gold bars are a store of value. Jewelry is not.