Gold Brief Investment Thesis

Investment Thesis for Gold

Gold has a wide audience that believes:

• it is a store of value

• it is an inflation hedging ability given its scarce compared with the supply of fiat money

• it is a safe haven during uncertainty and geopolitical Risk, e.g. financial crisis, wars, etc.

As described in Shut Up and Hodl Basket, I believe Gold is a religion that its tail risk of going extinct has a probability of close to zero given it has already hit an inflection point in history many years ago. It has enough followers, including sovereignty nations storing them for strategic reserves, to maintain its value, and potentially keep going up in value, matching the fiat money supply (e.g. USD).

Given Gold's special property of holding its value during a time of uncertainty, I believe it is a good hedge against human stupidity, e.g. US debt crisis, world wars, etc. I am going to accumulate it gradually. The proportion of new money going into my portfolio allocated to gold will be small, at most 10% or so, given its expected return is not as reliable as stocks as it has no cash flow. I am not a fully convinced gold bug as of 2025/02/07.

Why SPDR Gold MiniShares (GLDM)? 

I decided to use ETFs (exchange-traded funds) to invest in gold given they have the lowest acquisition cost and maintenance cost. The bid/ask spread is small as well.

GLDM is almost the cheapest gold ETF with only 0.10% expense ratio. iShares Gold Trust Micro (IAUM) has 0.09% expense ratio, but its market cap is only $1.46 billion, thus lower liquidity.

For long-term, the liquidity should not matter as much as the annual expense; however, GLDM is only 1/100 of a basis point higher in expense, while the liquidity advantage is much better with only 0.02% 30-day median bid/ask spread and 0.01% discount to NAV. Thus, I chose GLDM for its better liquidity to minimize the value lost from trading spread, and its better chance to survive for a long time. 

	GLDM	IAUM
Gross expense ratio	0.1%	0.09%
NAV	$10.1 billion	$1.46 billion
Average daily volume	2,749,720	1,657,417.00
30-Day Median Bid/Ask Spread	0.02%	0.04%
Premium/Discount as of 2025/02/07	-0.01%	-0.39%

Updates

2025/02/07 Initial version of this page

Wrote a brief reason on why I decided to start accumulating gold with a small portion of new money going into my portfolio.

I haven't read any books in depth about gold as an investment, yet, so the page is mostly from my simple understanding of why people use gold as a store of value. I will read some books to bring in more supporting arguments later.