The recent collapse in stock prices appears to persist. After an apparent recovery of stock prices last Thursday and yesterday, new data (quarterly earnings) was announced. Among others, internet companies such as Alphabet (Google) and Amazon reported their quarterly numbers. Alphabet fell after announcing its quarterly data by almost 5 percent in after-hours, whereas Amazon fell 8 percent due to disappointing sales growth. In addition, the other members of the so-called FANG group (Facebook

Well, according to many investors in gold, at least in theory. The central bank prints money, inflation goes up, and gold prices – as an inflation hedge per excellence – go up as well. This seemingly simple logic appears to hold some truth but is – unfortunately – entirely wrong. What is the real deal?

Earlier this year, I did a first attempt to value gold. The problem with gold is clear: it is incredibly difficult to value an ounce of gold, because we have no yardstick or underlying value to measure gold against. Better put: we can value a company by estimating the future discounted cash flows that the company is able to generate. Subsequently, we can compare our valuation (the company’s “underlying value”) against the current stock price (the “market value”), with the knowledge that the market value in the long run always tends toward the “underlying value”. Yet, how could we possibly compare the “underlying” gold replacement value against the current gold price?