Thesis

In investing, linear thinking is easy and pretty much useless. It only allows you to see what others are seeing too. The key is all about nonlinear thinking and seeing 2^nd order effects. And it is the thesis of this article to examine both the linear and nonlinear catalysts surrounding gold. In particular, I will use the SPDR Gold Trust ETF (NYSEARCA:GLD) and the iShares Gold Trust ETF (IAU) as examples to illustrate the role of these catalysts.

Most gold investors are familiar with the linear catalysts for a gold bull thesis such as a weakening dollar and negative real interest rates. And I will briefly recap them later in this article. However, the core thesis of this article is built around a 2^nd order and nonlinear catalyst: the price of Bitcoin (BTC-USD).

Eric Robertsen, the head of research at Standard Chartered Bank, posted a few possible black swans for 2023. The top black swan event in his mind involves Bitcoin. He sees the possibility for Bitcoin prices to crash to $5,000 from the current level. As a 2^nd order effect, such a collapse could push gold prices to $2,250 per ounce for the reasons he explained below (the emphases were added by me):

Eric Robertsen stated in the note that, considering a number of factors like insufficient funds or bankruptcies resulting in more crypto service providers packing up, more investors will likely begin to develop cold feet and will proceed to withdraw their assets. This, he said, will most likely lead to…