The price of gold, in U.S. dollars, has done nothing but go up since the beginning of 2023. Now the largest gold ETF in the U.S., the SPDR Gold Trust ($GLD) has some $100 billion in AUM, which seems notable. Also notable is the fact that gold on a real-basis is near record highs. You can play explanation bingo (central banks, tariffs, dollar depreciation, etc.) for the gold bull market. The bottom line is uncertainty.
Bitcoin is compared to gold for very good reason. Their prices rely almost exclusively on the whims of the market. The only difference is that gold has a couple of millenia head start on Bitcoin. Owen Lamont writing at Acadian Asset Management has a piece up defending Bitcoin against some its critics. The same argument holds for gold, and even Berkshire Hathaway shares. Lamont writes:
Jean-Paul Sartre’s 1944 existentialist play No Exit features three unpleasant people who die, and their punishment is to be locked in a room with each other for eternity: “Hell is other people.” Well, finance is other people, too. Whether we are buying gold, bitcoin, or Berkshire shares, we are hoping to eventually sell to other people. We cannot escape the complex web of economic interdependencies that bind us all together. Unless you are a hermit living off the grid, you cannot hold yourself in magnificent isolation away from the hurly-burly of the marketplace.
Campbell Harvey writing at Research Affiliates takes a comprehensive look at the price of gold today. It essentially serves as an update to his 2013, 2020 and 2024 papers on the nature of gold co-authored with Claude Erb. They noted that gold has been a good hedge to purchasing power of millenia. The problem is that the price of gold is far more volatile than inflation to serve as a useful hedge. Harvey also notes that gold is currently high relative to this measure of ‘value.’ Harvey writes:
In the end, gold has a long history as a hedging asset with consistently low correlation to the stock market. But expectations must be tempered. Gold is as volatile as the stock market. That means that we cannot always count on gold to do the job.
Today there is more than enough uncertainty to go around. This time could very be different, but you can’t always count on gold conforming to expectations. We won’t know the outcome until years from now. What is different today is that investors can change their exposure to gold (or Bitcoin) with the push of a button.* Act accordingly.
*In addition to walking into a Costco.
