Based on some posts I’ve come across and (online) interaction...

Based on some posts I’ve come across and (online) interaction with some other posters here, I thought I would share the framework through which I view the price of gold, and whether the price is one in which I should stay in or move gold (companies, I do not own physical or paper gold) out of my portfolio.

I started moving entirely into gold sometime in 2023 when it was $2,000. Having this framework has helped me in my decision stay invested in gold despite the ever-present fear that a sustained and deep fall could be round the corner which could ruin me (again) if I don’t get out in time. I’m sharing it in case it could be useful in helping others guide their own view of the gold price.

The first part of this framework begins with the idea that true price discovery for an asset like gold should be viewed minimally in terms of months, and not days. Such is the nature of gold as an asset. From this perspective, the daily price of gold is meaningless, and it is more useful for me to think of it in terms of bands.

Why months? I think it is important to recognize the crises in play that drive up the price of gold. The short term drivers like prevailing US interest rates or US dollar strength have little effect on what I call ‘true price discovery’. Those metrics are in my opinion not useful in determining whether gold is about to embark on a long slide down, but may be useful in determining the zigzag pattern as it goes down.In recent memory, everyone is very scarred by the sharp and prolonged multiyear 30% peak to trough price fall from 2012. So I looked at what may have happened before and after that.

Interms of ‘discovering’ a new gold price, it appears what truly matters aremacroeconomic crises. And they don’t discover a new price in days. It can take months,although that’s not always easy to see except in hindsight. But what appearsclear is that when the macroeconomic crisis passes, the gold price declines. Andsimilarly to price discovery on the way up, it is not a matter of days, or evenweeks.

In this multiyear case, it appears that the magnitude and number of crises meantthat the gold market took a long time to discover the new low price of goldbased on a world where there was no imminent danger. Peace as far as the eyecan see.

This has helped me not get swept up in the day-to-day gold price movements. Thegreed when gold jumps 3% overnight and fear when it does the opposite. InsteadI view the gold price in bands.

I started investing at $2,000, and I have been using a +/-$200 band. At $2,000 Idecided my checkpoint was $2,200 or $1,800. Right now my next ‘checkpoint’ is$2,800 or $3,200.

Is the crisis still going on? Are the factors that have been driving the price of gold still in play? Or do things look like they are settling? How has the gold price been tracking different moving averages?

And if these factors remain solidly in play, I am comfortable holding on to gold. If not, I will have to seriously think about holding gold (and related) as an asset class. Looking at gold this way has helped me with my decision making, maybe youwill find some use for it.

Gold in AUD is its own other big factor, but that's a different topic.