Gold and commodities built the foundation of wealth management for centuries. Modern finance largely abandoned them. The reasons reveal more about institutional incentives than about gold’s actual properties.
| Point | What it means |
|---|---|
| No yield | Gold pays no dividends or interest. Analysts trained on discounted cash flow models have no framework for pricing it. |
| Index fund dominance | The passive investing revolution moved capital into equity indices. Gold has no equivalent that behaves the same way in a portfolio context. |
| 1971 gold standard end | When Nixon severed the dollar from gold, gold lost its role as monetary anchor. It became just another commodity in institutional minds. |
| Advisory fee models | Fee income from equities and fixed income is far easier to justify to clients. Gold is difficult to build repeatable advisory revenue around. |
| Bitcoin’s position | Bitcoin shares gold’s scarcity properties but adds digital portability, cryptographic verification, and fractional ownership to 8 decimal places. |
The yield obsession that sidelined gold
Modern portfolio management grew up around the discounted cash flow model. Every asset gets valued by projecting future income streams and discounting them back to the present. Gold produces no income stream. There is nothing to discount.
This created a real problem for analysts trained exclusively in this tradition. An asset that has preserved purchasing power for three thousand years simply does not fit the spreadsheet. Rather than question the spreadsheet, most institutions quietly removed gold from serious consideration.
The same logic was applied to commodities broadly. Agricultural goods, metals, and energy inputs power the real economy. Their price movements carry genuine economic information. But because commodity exposure generates no income and complicates fund reporting, they were progressively de-emphasised in favour of assets that behave more predictably inside institutional models.
What 1971 actually changed
Before 1971, gold had a specific monetary function. The Bretton Woods system pegged major currencies to the US dollar at a fixed rate. The dollar was redeemable in gold at $35 per ounce. Every unit of currency in circulation was notionally backed by a physical store of the metal.
Nixon’s decision to close the gold window severed that relationship permanently. From that moment, gold became a commodity with no official role in the monetary system. Central banks could print money without any reference to gold stocks. The monetary anchor was gone.
For institutions, this created a clean narrative: gold’s monetary era was over. It had served its purpose. The future belonged to equities, bonds, and the instruments of the modern financial system. That narrative proved enormously convenient for those managing those instruments.
Institutional incentives and the advisory model
There is a structural reason why gold disappeared from mainstream advice: it generates very little fee income. Equities and fixed income products can be wrapped in managed funds, structured products, and advisory mandates. Each layer generates revenue. Gold sits in a vault. It does not.
This is not a conspiracy. It is simply the logic of a fee-based advisory system operating rationally within its own incentive structure. Assets that generate recurring advisory income get recommended. Assets that do not get quietly excluded from model portfolios.
Lyn Alden, one of the more thorough monetary analysts writing today, has documented this pattern in detail. Her work on monetary networks argues that scarce monetary assets attract capital even without yield, provided the monetary premium is properly recognised. Most institutional analysts never got that far in the analysis.
Bitcoin and the same objections applied inconsistently
Bitcoin attracts the same objections that were applied to gold: no yield, no cash flows, nothing to model in a DCF. These objections are entirely valid within the framework that generates them. They tell you something important about the framework’s limits rather than about Bitcoin itself.
Gold required vaults, armoured trucks, assayers, and custody arrangements with significant counterparty risk. Moving a tonne of gold across borders involves weeks of logistics and substantial cost. Bitcoin can be transferred globally in minutes, verified cryptographically without trusting a third party, and divided to eight decimal places for any transaction size.
The irony is real. Institutional resistance to Bitcoin on yield grounds is precisely the same resistance that caused gold to be marginalised. Bitcoin has all the properties that made gold interesting as monetary collateral, plus properties gold simply cannot replicate. Applying the same objection to a superior version of the asset suggests the objection was never really about the asset.
South African investors face this dynamic acutely. Rand depreciation has averaged several percent per year against hard assets for decades. The case for holding some portion of wealth outside the domestic monetary system is well established by history. Gold served that purpose for previous generations. Bitcoin is the instrument that fits the same role in a digital economy.
Frequently asked questions
Why do most financial advisers not recommend gold?
Gold does not generate fee income the way managed equity or fixed income products do. Most advisory models are built around assets that produce recurring revenue for the adviser. Gold sits outside that structure so it tends to be excluded from standard recommendations.
What happened to gold’s monetary role after 1971?
The Nixon administration closed the gold window in August 1971, ending the Bretton Woods arrangement. From that date, the US dollar was no longer convertible to gold at a fixed rate. Gold became a commodity rather than a monetary anchor, which reshaped how institutions classified and valued it.
Is Bitcoin just digital gold?
Bitcoin shares gold’s key monetary properties: fixed supply, durability, non-sovereign issuance. It adds portability, divisibility to eight decimal places, and cryptographic verification. Whether that makes it “digital gold” or something categorically new depends on the framework used. What matters practically is that it serves the same portfolio role while solving gold’s custody and transfer problems.
Do commodities still matter for investors?
Commodities reflect real economic activity and can provide genuine diversification from equities. The issue is that institutional models have been built around income-generating assets, which means commodity exposure is often underweighted. That underweighting reflects the incentive structure of the advisory industry rather than a considered analysis of commodities’ economic role.
What is the monetary premium Lyn Alden writes about?
A monetary premium is the additional value a scarce asset commands because it functions as a store of value beyond its industrial use. Gold trades well above its industrial value because markets recognise its monetary role. Bitcoin’s monetary premium, Alden argues, is still being discovered as more participants recognise its properties.
Sources
- Lyn Alden Investment Strategy: monetary network analysis and the case for scarce assets without yield
- Bank for International Settlements: historical analysis of the Bretton Woods system and gold’s monetary role
- IMF Working Paper: Gold as International Reserves: review of gold’s evolving role in reserve portfolios post-1971
- South African Reserve Bank: rand exchange rate history and South Africa’s reserve asset framework
Ready to get your Bitcoin position right?
SimplB helps South African investors buy and hold Bitcoin properly. A short call is a good place to start.
Talk to a Bitcoin SpecialistWritten by James Caw, Founder of SimplB. James has helped South Africans understand, buy and secure Bitcoin since 2015. SimplB operates as a Juristic Representative of CAEP Asset Managers, FSP 33933. Last updated: May 2026.
This article is for general educational purposes only and does not constitute financial, legal, tax or exchange control advice. The information reflects the regulatory position as at the date of publication. Your individual circumstances may differ and you should seek qualified professional advice before making any decisions.
