Entering text into the input field will update the search result below

Update: Alternative Gold Valuation

Aug. 22, 2019 11:36 AM ETSPDR® Gold Shares ETF (GLD), IAU, PHYS
HeyTommy profile picture
HeyTommy's Blog
Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

In a previous post I introduced my theory for an alternative approach to calculate the fair value of gold.

The theory in summary:

Demand and supply agree on a spot price. Gold serves as store of value as well as a tradeable asset (ie. GLD). If we take into account the forces that influence the demand of gold, we can extrapolate the fair value. The Shiller CAPE is used as a measure to de-distort the gold demand. High demand for equities reduces demand for gold and vice versa.

Note: Due to different sizes of the equities and gold market, the transformation is "fit". However, it is a constant factor in the calculation.

Alternative Gold Fair Value Calculation as of July 2019Data source: Quandl.com

Current results - all data as of End of July 2019:

  • Shiller CAPE: 30
  • Shiller Median: 20
  • Gold Spot Price: $1430
  • Extrapolated Fair Value of Gold: $2625
  • Current Gold Fair Value Trendline: $2334


The market still preferres equities over gold. This provides an attractive price for adding to a gold allocation in a portfolio.

This does not imply any price projections over the short term. But in the long run I  expect the gold price to keep up or catch up to the extrapolated fair value.

Note: I always hold a part of my portfolio in gold as physically backed funds and physical.

Analyst's Disclosure: I am/we are long Physically backed Gold ETFs.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.