The Case for Gold
The comments below are an edited and abridged synopsis of an article by Jared Dillian
Dillian has been making the investment case for gold since 2005, when the first physical gold ETF was listed. He bought some, and he continued to do so.
“You could skip this note and just read Alan Greenspan’s 1966 essay ‘Gold and Economic Freedom,’” Dillian says, but Greenspan’s is a little denser and more ideological.
“His [Greenspan’s] goes something like this: A Treasury bond is a claim, and as you issue more bonds, eventually you have more claims than assets… That’s when inflation happens. We are there.”
Up for discussion: How we got here; winners and losers; and the only reason NOT to be a gold HODLer.
Dillian has been dealing in gold for 16 years, and has a great deal of patience with it. It will go when it goes, he says. But gold does have a tinfoil hat element, though gold investors seem downright sane next to Bitcoin investors.
The original HODLers were gold investors; go back to 2011, and people were saying that they would never sell. The lesson Dillian took from that episode is that there is always a time to sell. Everything is a trade.
The Bitcoin people took this to an extreme, and they’re now sitting on a pile of losses. But with gold, there is no reason to take profits until the US starts running balanced budgets.
If the US gets a fiscally conservative president and a hawkish Fed, the jig will be up, and markets will discount that well into the future.
Until then, Dillan will hold his 30% precious metals position. It does not have a great deal of volatility (at the moment), so it does not cause him a great deal of stress.
And gold appears to be prepared to retest $2,070 or so. That’s about 11% higher than today’s prices.
If you don’t own enough, now might be a good time to start.