Getting The Theme Straight

In a long Minyanville article, James Kostohryz emphasizes the importance of having a consistent theme, or rationale, if investing in gold. Betting on inflation has, at best, a spotty justification; gold doesn't have that great a tie to inflation. Betting on a falling greenback is easier done with an inverse ETF nowadays. Betting on a concerted devaluation of all fiat currencies is fine, but it's a different bet than simply betting against the greenback.

He embeds an interesting nugget. Using the gold price as compared with the average all-in costs of gold mining companies (he uses $800/oz), he concludes that gold's implicit forecast for long-term inflation is close to that of TIPS right now: about 2.1% for the former, as opposed to 2.4% for the latter.

The article itself, which is quite thoughtful if a bit cold-waterish, explains the methodology behind his conclusion in the midst of his counsel.