Thread by @StanphylCap

1) Thread on gold/ $GLD...

I own a little $GLD but a lot more $SLV due to solar & and electronics)= demand. Here's why I recently cut our $GLD position:

If gold is "money," what matters is how much you can buy with it vs. fiat currency...

2) I believe that at gold's current price, a MASSIVE amount of future CPI inflation/dollar degradation is already priced in. Here's why:

Eyeing the long-term price chart, from 1989 to 2003 (plenty of time to establish price stability), gold opened & closed @ around $350...

3) So from 1989 to today's $1875, gold is >5x. Yet
From 1989 to today, $350 in a CPI calculator gives you $735. So in theory, if gold were priced right in 1989 (a reasonable assumption, as it stayed there for the next 14 yrs) AND if gold tracked CPI, that's what it would be worth

4) Of course we all know the "CPI understates inflation argument" so let's say the "real" decline in the buying power of the dollar has been double CPI-- that would put gold's fair value @ $1469 right now...
$GLD

5) If you then think "real" inflation going forward from today (vs. current core CPI of around 1.5%) will compound at an average of, say, 5% a year, gold doesn't get to $1875 for another 5 years. That's why I'm not an enthusiastic fundamental buyer here.
$GLD

6) For me to own a lot of gold/ $GLD now, the price would either need to be much lower or my inflation expectations (and I do have them!) would need to be MUCH higher than 5%/yr for the next 5 years.

7) I'm not saying these are the right numbers/answers, but this is my thought process- how I try to come up with a "rational value" for a hunk of metal that trades as much on emotion as anything else. Inflation prospects aside, at least $SLV has the underlying industrial demand.