To purchase gold isn’t much different from hiding money in the proverbial coffee can. Yes, rising gold signals a little or a lot of economic decline.
The yellow metal’s upward trajectory in dollars brings to mind a weekly gathering of old at Caltech. Professors wouldn’t talk about the experiments that worked, rather they’d revel in the ones that didn’t. That failed. As Caltech professor Carver Mead put it to George Gilder about those meetings of advanced minds, if all of your experiments work out as expected or desired, “you haven’t learned anything.” Yes, it’s like buying gold.
It’s already wealth. That’s why it’s so attractive during times of uncertainty about the world, or the currencies of the world. Gold is so constant as wealth that it doesn’t move up or down as much as the currencies in which it’s priced are moving up and down, only for the golden constant to reflect this truth.
Gold is a beautiful mirror, and also a crucial one. It’s not telling us about itself since gold is already gold, but it is tattling on President Trump and Treasury secretary Scott Bessent. Either because Trump plainly wants a weak dollar (he always has), because Bessent as the mouthpiece for the dollar is practicing what the late George Melloan described as “an absence of policy” in the form of “benign neglect” about the dollar, or both, the dollar is in decline. That’s the message of gold, which once again only moves up or down insofar as the dollar in which it’s priced is moving up or down. With a gold ounce at all-time highs of $4,000, that’s the metal’s way of saying that the dollar is at all-time lows.
One more thing about gold’s message. Whatever readers do, they would be very wise to not “adjust” the price of gold for inflation. Gold is once again a constant. That’s why global markets happened upon it long, long ago as the definer of money par excellence. What doesn’t move is the best way to define money precisely because money’s sole purpose is a measure meant to facilitate the exchange of actual wealth: think goods, services, labor. At which point the act of adjusting gold’s price for inflation is the equivalent of adjusting the 1975 foot for the 2025 foot. Sorry, but there’s no adjusting constants.
All of which allows us to contemplate the sad meaning of the dollar’s substantial decline reflected in gold. It’s screaming crisis not in the future, but in unseen of the present. Seriously, how to contemplate what’s not known, what’s not being experimented with, and the progress not taking place because confidence in the dollar is declining such that hedging of the dollar’s decline through purchases of gold is rising?
To answer the question, we need only tack back to Carver Mead. Progress is born of information, and information is born of relentless, frequently expensive experimentation that for frequently telling us our assumptions were wrong, sets us on the path to wealth-creating information discoveries.
Crucial about this is that gold is no such discovery. When we buy gold it’s the same as doing nothing. Gold as a constant measure of wealth is yet again already a known, which means that more dollars flowing into gold is precisely fewer dollars being matched with people intent on creating a better, richer future via discovery.
So no, gold is not an investment. How can what is a safe haven meant to protect existing wealth be an investment? In truth, it’s just wealth idled, as though placed in a coffee can.