This tweet has nothing to do with my political affiliation, or beliefs. 

I’m an investor, an observer, my job is to synthesize information and seek out opportunities that will make me (and my fellow investors) as much money as possible. 

This is the process that led me to buy so much damn gold.

You see, gold is a hedge against bad government decision-making, it is antifragile.

Antifragile

Antifragile is a word and philosophy created by Nassim Nicholas Taleb that helps investors account for luck, uncertainty, probability, human error, and decision-making in a world where we don’t, and can’t, fully understand the risks we face.

There was no word for the opposite of fragile; so Taleb created “antifragile.” 

Instead of getting damaged by strain, that which is antifragile grows, benefits, and becomes stronger after being exposed to stress, uncertainty, and volatility.

When antifragile systems are deprived of stresses and volatility they become weaker. 

Biceps are antifragile – the more you work them the stronger they get. Skip the gym and you become a withered shell of a man. 

Gold is antifragile.

It’s the oldest form of currency, and store of value, still in use today because it’s antifragile. Gold survives and thrives on incompetent politicians, natural disasters, global pandemics, and uncertainty. 

The greater the unknowns, risks, and volatility, the better gold performs.

But, what does gold protect us from exactly?

It’s not direct protection against inflation or stock market crashes. Gold is protection against cracks in the economic system. More specifically, gold is a protection against poor decisions by the government. 

Inflation and stock market crashes are a byproduct of these poor decisions.

The best way to hurt the price of gold is to run balanced budgets.

This means fiscal conservatism. Over the past 20 years, both Democrats and Republicans have become very fiscally liberal.

The world has been seduced into believing that we can print and spend our way to prosperity, but real wealth is created by individuals and businesses working for their own gain to benefit society as a whole.

Reality Check – what do the numbers say?

It is hard to measure antifragility, and it is even harder to measure “bad government decision making,” but after digging through the data we’ve identified two important drivers behind gold price.

1. Real Rates; and

2. The U.S. Fiscal Deficit.

Here is the two-minute overview and how you, as an investor, can use this info to make money. 

The Golden Barometer – Real Rates 

Real rates are interest rates adjusted for inflation. 

Real Rate = Interest Rates – Inflation

When interest rates rise faster than inflation, real rates go up and gold does poorly. 

When inflation outpaces interest rates, real rates fall, and gold prices run. 

The dropping pressure on a weather barometer signals we’re in for a storm. Dropping real rates indicate gold is about to be hit by a money storm.

The following chart demonstrates just how closely the gold price has tracked real rates for the last 8-years.