The Controllers' incentives around Gold and Gold's price
Keep gold as respectable SoV, not insurgent money. Let it drift up in line with managed inflation + geopolitics; cap disorderly squeezes.
I am not convinced that the official narrative about gold’s inflation rate is true.
My hypothesis is that Gold’s true supply inflation (new metal entering freely tradable float) is materially lower than the “official” 1.5–2.5% headline you see from industry yearbooks.
The gap isn’t magic; it’s classification games + off-market absorption + paper overlays that make supply look fatter and price look tamer than the underlying physical reality.
The lie (or, if you prefer, the “comfort story”) keeps term premia, inflation expectations, and reserve migration in check while new monetary rails are built.
I’ll be doing some research on gold in the coming weeks, not sure if I’ll post it on here.
This will be a quick article on the Controllers’ incentives around gold and gold’s price.
1) First principles: why gold matters to the Controllers
System thermometer. A fast-rising gold price is a public vote of no confidence in fiat/sovereign balance sheets. That threatens stability and narrative control.
Collateral of last resort. In cross-border stress, gold clears with minimal counter-party risk. The Controllers want that optionality, but not a crowd stampede into it.
Pressure valve. Gold absorbs dissenting savings without enabling everyday resistance (unlike self-custody digital Medium-of-Exchange). That’s containment.
Accounting lever. Statutory book values and balance-sheet marks can be used to repair sovereign/central-bank equity when desired — on their timetable.
Net incentive: keep gold available, respectable, and bounded—a credible but domesticated hedge. Not discredited (which pushes dissidents into harder-to-control rails), not runaway (which advertises fiat rot).
2) Target state = Managed Corridor, not permanent suppression
The Controllers want volatility compression and a gentle upward drift consistent with “inflation + geopolitics” narratives — not a moonshot that signals regime failure.
Floor: supports allies with gold production/export, gives Central Banks room to “diversify reserves” without looking panicked.
Ceiling: avoids triggering retail panic, sovereign run dynamics, or dollar confidence shock.
3) The actual levers (how the corridor is enforced)
A. Paperization & term-structure shaping
Expand unallocated and derivative gold (forwards/swaps, ETF shares) relative to deliverable bars to soak demand without draining vaults.
Encourage roll yield traps (contango) so buy-and-hold speculators underperform physical over time.
Favor large ETFs and custodial wrappers as the default on-ramp for retail and institutions; make allocated and self-custody just inconvenient enough.
B. Flow governors (central & sovereign)
Central Bank purchase cadence as a metronome: steady buys on weakness, “pause” on disorderly melt-ups.
Use sovereign producers (royalties, export quotas, windfall levies) to modulate mine supply and miners’ forward selling.
C. Narrative & optics
Frame spikes as geopolitical hedges, not monetary indictment.
Promote “diversified real assets” baskets so flows dilute across commodities/Real Estate/infrastructure rather than vertically into gold.
D. Plumbing & policy nudges
Reporting/tax friction on high-value cash bullion trades; AML/KYC rails for dealers.
App-store/payment policy: throttling bullion dealers’ acquisition channels.
Capital controls in stress (import/export rules, customs scrutiny).
E. Balance-sheet valves
Maintain low statutory book values for public gold (e.g., legacy marks) to preserve optionality for a controlled revaluation event if/when balance-sheet repair is needed (banking crisis, debt exchange optics).
4) When the Controllers would welcome a higher gold price
Debt optics / stealth deleveraging: a controlled step-reval (not astronomical) improves sovereign/Central Bank equity without overt default.
FX realignment: in a dollar-weakening orchestration, letting gold “signal” a regime shift can coordinate global expectations.
Sanctions era diplomacy: allows non-aligned blocs to park value without creating an overt alternate reserve currency.
Crucial: the Controller payoff is option value — they want the button to make gold “work” when useful, but keep it boring day-to-day.
5) What they absolutely do not want
Gold-as-money movement at retail scale (parallel Medium-of-Exchange). Hence: focus on store of value, not payments.
Self-custody surge that bypasses wrappers (GLD/ETFs/custodians).
Squeeze on deliverable bars that exposes the paper/physical ratio.
Feedback loop where gold becomes the political scoreboard of failure.
6) How this plays with Bitcoin
Gold as the respectable, surveillable safety; Bitcoin as the censorship-resistant risk.
The Controllers prefer gold/ETF containment to a mass migration into sovereign BTC for Medium-of-Exchange (MoE).
If BTC threatens MoE, raising gold’s profile can siphon protest savings into a controllable park.
I’ve written more about this in my “Why Gold has been allowed to run“ article.
7) What you should expect in a low Gross Consent Product decade
Trend: modest, persistent nominal up-drift in gold consistent with 2.5–4% CPI + geopolitical risk premia.
Tactics: episodic “air pockets” on policy jawboning; sharp bounces on crisis headlines — both inside a gradually rising channel.
Wrappers’ share of exposure remains high; allocated premiums widen in stress windows but revert.
8) Risk map (what could break the corridor)
Deliverable squeeze that forces visible cash-settlement or ETF redemption failures.
Major Central Bank reserve disclosure swing that looks like panic.
Sustained inflation overshoot with credibility loss and inability to repress rates (then gold runs beyond corridor).
Sanctions fracture that elevates gold to primary reserve across blocs (less likely while dollar plumbing dominates settlement).
9) Front-run the reval scenario (not base case, but material)
Watch for:
Accounting policy debates on reserve marks;
Synchronized Central Bank communiqués about reserve composition “modernization”;
Stress in sovereign funding + “unity” language.
If those cluster, you might want to buy some physical gold.
10) TL;DR (the Controllers’ incentives)
Keep gold as respectable Store-of-Value, not insurgent money.
Let it drift up in line with managed inflation + geopolitics; cap disorderly squeezes.
Use paperization and policy nudges to steer flows; keep revaluation as an emergency balance-sheet tool.
Prefer gold absorbing dissenting savings over self-custody Medium-of-Exchange alternatives.
Stability > truth: gold should signal “prudence”, not “fiat failure”.