Commodity Watch:Gold is Lindy

<div class="grid grid--33-66-col"><div class="col"><img loading="lazy" data-fr-image-pasted="true" src="/getContentAsset/e4db1c4c-2687-44cd-adbd-db1eb849e5d2/cb87803a-320c-480f-ab75-7b9029eaaf79/Ahmad-Al-Sati-new.jpg?language=en" alt="Ahmad Al Sati" title="Ahmad Al Sati" class="fr-fic fr-dii" style="width: 180px"></div><span style="font-size: 12px"><div class="col"><strong>AHMAD AL-SATI<br></strong>PORTFOLIO MANAGER<br><br><p>Ahmad is the President and portfolio manager for Gemcorp Capital Advisors LLC, based in New York.&nbsp;<br><br>Ahmad has spent most of his career in the global credit markets. Prior to Gemcorp, Ahmad was President of Pandion Mine Finance and RiverMet Resource Capital, LP - a fund focused on investing in precious metals, where he was responsible for managing the investments and the day-to-day operations of the registered investment adviser.&nbsp;</p></div></span></div><hr><p>Comedians at a New York delicatessen theorised that a comic’s longevity is inversely proportional to their exposure. Mathematician Benoît Mandelbrot reached the opposite conclusion arguing that a comic’s longevity is in fact enhanced by exposure and that their future expected professional life equals their past professional life on average, i.e. a comic that has been on the circuit for 10 years was likely to last another decade. Nassim Taleb developed this concept further by describing certain non-perishables as “aging in reverse” in what has become known as the Lindy Effect.</p><p>These concepts might not seem to fit the current state of financial markets. After all, the top 10 market-cap companies at the end of any given decade are unlikely to be the top 10 in the subsequent decade, as companies die or falter. Wall Street also loves to create new financial instruments to sell. CDO-Squared, anybody?</p><p>Yet, Lindy struck again. Last week, the FT reported that Tether, the largest stablecoin company, is looking to invest in the gold supply chain. 1 Tether already holds $9 billion in gold reserves and sponsors a gold token. For a company central in building a new asset class, the decision is both strategic and logical.</p><p>Gold’s benefits are the Lindy Effect. Gold has served as a store of value and a medium of exchange for millennia. It can be an inflation and currency debasement hedge. According to the Bank of Canada, 14 ounces of gold in 1935 bought an average car. Today, 14 ounces of gold would buy a $50,000 car, which is the average price for a car in the US, per Kelley Blue Book. Gold also provides diversification and hedging benefits to portfolios as it tends to be less correlated to a 60/40 portfolio, especially during downturns. Gold can also experience prolonged runs of positive returns as it did in the 1970s, 2000s and since 2020 (where its price has more than doubled).</p><p>Owning gold directly, however, can be cumbersome. Storage costs without corresponding income eat into returns. The physical asset is heavy, difficult to move and operates in an opaque market (commissions can be as high as 5%). Therefore, when prices are flat, investors can be stuck in a languishing asset. Futures involve volatility, directional bets, and negative roll yield risks. ETFs offer less control and downside protection and may be subject to the same risks as futures if they do not own the physical gold.</p><p>However, with increased and continued demand for gold (up 45% year-on-year in the first half of 2025 to $132 billion) and heightened uncertainty, investing in gold may outweigh the risks. The FT article refers to Tether’s interest in the entire supply chain, a shrewd approach given that is where the real value might lie.¹ As we say, supply chains matter and, in this case, they might provide opportunities for investors. Finding, producing, smelting, moving, and owning gold (in its various forms) could provide investors with a myriad of methods to deploy capital and generate differentiated returns and income from the ultimate Lindy asset.</p><blockquote><p>“Use laws that are old, but food that is fresh” <strong>– Periander of Corinth</strong></p></blockquote><p><br></p><p style="font-size: 12px">Source: ¹. Hook, L. and Asgari, N. (2025) Stablecoin group Tether holds talks to invest in gold miners. Financial Times, 8 September. Available at: <a data-fr-linked="true" href="https://www.ft.com/content/135fb3dd-2395-4f04-8cc6-7fb0e87cd092&nbsp;">https://www.ft.com/content/135fb3dd-2395-4f04-8cc6-7fb0e87cd092&amp;nbsp</a>;</p>