Gold, who’s line is it anyway?

Gold has been a consistent puzzler throughout our titular recovery. Equities seem to be comfortably holding on to their fifty percent gains compared to the depth of the crisis. Gold is still at a record price. Treasury yields are close enough to zero that there is no where for their value to go but down.

Investor’s are not hiding from equities, and they are not hiding from US government debt. Gold is a safe haven store of value. What are gold investors hiding from?

I think the answer is that they are not hiding. I think that the money sitting in gold today sees it not as the thing least likely to go down, but as the ting most likely to go up. Well duh, why else would you invest in something? But gold is not an investment. Gold is a store of value. One puts money in gold when one thinks that the sky is going to fall.

But if there is enough sky is falling market sentiment to keep gold at a record high, shouldn’t there be enough short interest in everything else to move things off of their relative heights?

However, if you are convinced that everything is going to go sideways for a significant portion of time, how do you make money? You can’t earn any interest. You can’t short anything because the training wheels are still on and there are not enough growth prospects to give any hope of rising bond yields.

So you hold gold because there is no point in doing anything else. At least it’s shiny.