There Is No Such Thing as Investing in Gold and Silver

You can't invest money in itself. You can only earn it, save it, or spend it.

• This is a philosophical piece I wrote last month for a colleague that I am publishing now.

• Investing in gold is a myth. Gold is money and cannot be invested in itself.

• Everything becomes cheaper in gold and silver terms over time. There are no exceptions. When the money derivatives finally die, everything will be come so radically cheap in gold and silver terms it will shock everyone.

• People are starting to reject gold derivatives and are turning to physical gold as a form of saving and protecting their wealth.

There is No Such Thing as "Investing" in Gold

Welcome to Part IV in this ongoing series of busting myths about gold and silver. So far, we've busted four pervasive and pernicious myths. These are:

1. The myth of going off the gold standard.

2. The myth that central bank digital currencies will enslave all of humanity forever.

3. The myth that some other currency will replace the dollar in the End Game.

4. The myth of silver demonetization.

Today, let's go into the myth of "investing in gold".

You Can't Invest in Money Itself – You Can Only Save it or Spend it

To put it bluntly, as is my wont, there is no such thing as investing in gold. Let's start with an analogy. Transport yourself back to, say, 1850. The dollar was defined as about 1/20^th of an ounce of gold. If you went to your 9 to 5 job as a blacksmith forging, say, pitchforks for your local farmers and you earned a salary of $5 a week, could it be said that you were "investing" in one quarter oz of gold per week? No, you're just earning money, which is gold. After you earn it, you can then either save it or spend, which includes investing it in something gelse. But in order to invest, you have to invest in something else that is specifically not gold. It is not possible to invest gold in gold.

What about speculating? Can you speculate in gold? That may sound reasonable, but again, it isn't possible, and for the same reason. Gold is money. When you hold it, you are specifically not speculating. If, however, you were to take that money and acquire derivatives with it, like paper dollars or digital bank deposits (say, like the ones in your checking account), then you are actively speculating in those derivatives. There is no such thing as speculating in money itself. Ultimately, you can earn money, spend money or save money, but that's it.

Everything is Cheaper in Gold Terms Over Time Because Money Works

What you decide to hold depends on how far up the derivative pyramid you want to go, if at all. As long as you stay on the ground floor, you are saving. As soon as you take one step up into dollars and anything above that, you are speculating. Due to the distortions that money derivatives like the dollar cause through the inflationary system, it may seem like gold is volatile and therefore speculative, but that simply is not true. This is easily provable. Consider the following charts.

Above is the Dow/gold ratio over the last 50 years, since gold's final statutory link to the dollar was severed, and the systematic inflation of derivatives including stocks in the Dow Jones really took off. In that time, the ratio has fallen from the black line to the red line, or about 18%. That means money outperformed stocks by 18% since inflation began in earnest. In other words, "investment gains" in stocks during an inflationary period are an illusion.

What about housing? Same thing.

Real estate prices are not up in money terms. In fact, they are way, way down, by over 50% since 1964, the year that silver stopped circulating in coins. If we were to count from 1971, it would be even more extreme. Housing is only "up" in inflated derivative dollar terms, which means that all real estate gains are an inflationary illusion as well. That illusion holds up only insofar as the dollar retains some exchange rate with gold. The minute it does not, all those illusory paper gains disappear entirely.

What about energy? Same thing. The supposed rise in the price of energy is an inflationary illusion just the same. Back in 1870, it took about 27 barrels of oil to buy one ounce of gold (see red line). That price has not moved at all in over 150 years.

The same is true for every single commodity in the CRB index and every metal traded on the London Metal Exchange, without a single exception. That includes corn, oats, soybean oil, soybean meal, cocoa, coffee, milk, orange juice, sugar, wheat, feeder cattle, live cattle, lean hogs, rice, cotton, pork bellies, lumber, aluminum, lead, tin, copper, and zinc. All of these commodities have gotten massively cheaper over the long term in real money terms.

There is No Such Thing as Cherrypicking Gold Charts

Now, you could object and say that I'm cherrypicking. My rebuttal is that the very concept of cherrypicking dates is irrelevant in this context. Cherrypicking is only a relevant objection when you could theoretically establish a full position all at once on a single date and unload it all at a different date. Such is the case with investing in stocks or commodities or bonds. Say, if you invested 100oz gold in the Dow, or in real estate, or in Treasurys, or in commodities futures on date X and closed your investment position on date Y. Whatever X and Y happen to be, you can always find a range where you'd lose on the investment, and another range where you'd win. Hence, cherrypicking is a real issue regarding investment.

But it's not even relevant at all when you're talking about gold because gold is money. People don't "buy money" itself all on date X and then "sell money" on date Y. That would be like saying people are generally paid all at once in advance, or upon completion, for the entirety of their labor at a given job. This is not how money is earned. People earn money over time in steady incomes. Once you earn it, you can either save it or spend it. If you save it, you by definition save it over time, and therefore, in the most natural sense, you have a spread of "entry points" in your "investment" in money. Therefore, there can be no cherrypicking.

And here we get to what stacking really is and how it should be done. If gold is money, then it should be treated as such when stacking. Meaning, if you understand what money is and that all of its derivatives are caught in in an inflationary Tower of Babel that will soon collapse into nothing, then we should stack money as if we are earning it directly as an income, every month, with regularity. It should be a certain number of ounces every month or every quarter, whatever you can reasonably afford to save in gold or silver or both.

This is the only rational way to accumulate real money, because it emulates how it would be earned in a sound money, noninflationary world. Otherwise, we are treating money as if it were a speculation, when it isn't. We'd be stuck, glued to our screens watching the daily price movements, counting our illusory dollar profits or losses based on when we "invested". We'd become addicted to trading in and out of money through derivatives like gold ETFs as a way to accumulate other derivatives (dollars), when in the end all those derivatives – both the dollars and the gold ETFs – will necessarily collapse anyway.

The dollars will collapse and become worthless because at some point they will not be able to be converted back into money, and the gold ETFs will collapse in value because the banks that manage them, or the government itself, will seize all the gold they hold in a national emergency just like FDR did back in 1933. It will be much harder if not impossible for them to raid decentralized retail-sized private stacks all over the country.

The good news is that people are starting to realize this, and the popularity of gold ETFs has plummeted since gold climbed out of its low in November 2022. I say that because of this:

Above is weekly transparent gold holdings across all public gold funds. This includes all ETFs, Comex stocks, and all allocated and unallocated third party storage programs. The blue line is the amount of holdings in these funds, and the orange line is the gold price in dollars. You can see here that the amount of gold stored in these places has fallen since November 2022 when gold climbed out of its low at $1,618. It is normal for gold holdings to fall with the gold price, but not to continue falling despite gold rising. And so we can see that ever since gold's climb from the 2022 lows, people have been rejecting ETFs in favor stacking physical gold privately, outside the purview of these transparent funds.

In other words, the discrepancy here between the gold price and transparent gold holdings is disappearing into private stacks. This did not happen during the run from 2000 to 2011. That was almost entirely a rush into gold derivatives. But since November 2022, stacking has turned a corner, and for the first time, people are moving into actual money and shunning paper (digital) gold derivatives. In fact, GLD has fewer gold holdings now than back in 2019. See the red line below in the chart of the gold price vs GLD holdings.

Even more encouraging, it's not just GLD. Holdings are falling for virtually all transparent gold funds. This can be deduced from the following two charts.

Above, we can see that since the 2020 panic, total gold holdings across all transparent funds is up somewhere around 11 – 11.5M ounces, eyeballing the distance between the two black lines. Moving to the chart below, we can see exactly where that increase comes from.

Above is physical gold holdings in Comex vaults. They are up about 11.6Moz since the 2020 panic surge, about the same as the increase across all gold funds since then. Meaning, on net, all other gold funds have added nothing since 2020 despite gold rising 41%. Compare this to what was happening during the 2000 – 2011 gold bull market, and the difference is obvious.

What this shows is that the tide is finally turning. People are shunning gold derivatives and turning to actual money. People are no longer using gold derivatives as trading vehicles to accumulate more dollars, but rather treating gold as what it is. They are seeing it as money and stacking month after month regardless of the dollar price.

People are understanding – perhaps not consciously or intellectually but intuitively – that there is no such thing as investing in gold. People are simply climbing off the inverted pyramid and actually saving money. They are starving the inflationary system, waiting at the bottom floor for the layers of illusion at the top to fall over. Once they do, the stackers will be able to buy up the pieces at phenomenally cheap prices in real money terms.

And from there, we can rebuild into something a lot more stable. In the mean time, we have to keep stacking. Methodically, relentlessly, responsibly, month by month. Not as a speculation, not as an investment, but as saving and starving the monetary Tower of Babel until it collapses once and for all.