I have been a gold bull, unrelentingly, since 2005. It has been quite an adventure.

Nine years ago, I was 31—still pretty young. I hadn’t read enough Austrian economics to even understand why I should like gold, but I did nonetheless. Besides, it was going up. And coincidentally, the folks at State Street had just come out with GLD, the SPDR Gold Shares ETF, and I was a market maker in it. Without GLD to invest in, I wonder if I would have had the inclination to learn about investing in gold futures or physical gold.

I also noticed that politics were starting to move left, deficits were getting larger, and the Fed had committed a policy error post-tech bubble in leaving rates at 1% for so long. 2005 was late enough to recognize that we were blowing a big housing bubble and monetary policy had certainly played a role in it.

Gold turned out to be a pretty good trade. I owned GLD up until the financial crisis, and I bought more on the 30% correction in 2008—with veins popping out of my neck because I knew that quantitative easing was on the way. It was by far the biggest position in my portfolio.

The narrative that developed at that time—“The US is printing money; we are going to end up like Weimar Germany, in hyperinflation”—made sense to me. It made sense to a lot of people. It has not come to pass, for some reasons we understand (it takes years to work off deflationary forces) and some we don’t.

That’s not to say that Milton Friedman’s quantity theory of money has been discredited. Money velocity has plummeted and keeps plummeting, for some reasons we understand and some we don’t.

Suffice it to say, the last three years have been very painful as an owner of gold.

Why You Should Own Gold Anyway

A lot of folks think that the price of gold correlates with the Federal Reserve balance sheet, and I think that’s partially true, but it’s not the whole story. I think it also correlates with the budget deficit.

When gold was at its highs, our deficit was at clearly unsustainable levels, over 10% of GDP. That’s at about the level that certain European countries started getting margin calls. There was this idea that our deficit would continue to grow, resulting in an oversupply of bonds and failed Treasury auctions, and that the Fed would have to directly monetize the deficit. Not unreasonable.