They call bitcoin digital gold and it is often said that it will replace gold. In recent turbulent times with inflation running away, gold has simply not performed.

Here is the long term chart:

I’ve left the end open rather than jam today’s price on the edge of the frame of the chart because this is a good trick to help visual the future. In the old thinking, gold should have rocketed in the pandemic and continued that ascent with the resulting inflation. It has not.

I believe that this is because bitcoin has been a most convenient asset for getting out of a jam with. Most of us have seen stories of lorries of gold getting captured in Iraq and millions in cash getting left on the Kabul tarmac as corrupt officials failed to be able to stuff all their bribe money onto the fleeing helicopter. There simply is not that problem for bitcoin.

Yet times are changing. Crypto on/off ramps are slowly getting choked off but even still I’d fancy my chances with a private key better than trying to absquatulate with a ton of gold or a palette of Benjamins. Absquatulate is an obsolete word for doing a runner but so might gold.

However, with the walls coming in for bitcoin, the shine might come back for gold as a haven asset.

The supply of gold increases at about 1%-3% every year depending how you want to count it. There is a lot of stagnant gold out there that hasn’t moved in a century or two, so the yearly product is quite a lot higher as a percentage if you look at gold “in circulation.” However, never mind that, gold’s underperformance is quite likely because bitcoin has drawn away an important use case for gold, that as a way to hoard wealth.

So the gold chart is looking interesting because a bull can easily predict a new parabola while a bear can easily see $1,000 in the blank space of the next decade.

To me the way to play gold is simply to DCA (dollar cost average) it and make sure it’s a couple of percent of your holdings, and this strangely is also the best way to approach bitcoin and ether.

If the current geopolitical situation means gold breaks out above its previous highs and starts zooming through 2150 then that is a signal that bulls are on course for a very serious win with silver following along.

If gold can’t break out it will be time to wonder if it really is time to start treating it as just another commodity.

However, there is a nice way to calculate the price of gold. There is $500 trillion dollars of assets in the world, and $12 trillion of gold. If you think everyone should have 2.5% of their assets in gold then that’s exactly the right price. If you are old school and think that it should be 5% then gold should be $4,000 an ounce and if you are a “gold bug” and think it should be 10% then $8,000 is your number.

So the more regulators squeeze bitcoin and/or hideousness develops in the world at large, the higher that number is going to be.

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