🗺️ Gold Quest: Follow the Map, Unlock the Treasure
Solve each clue to unlock the next chamber. By the end, you'll know why gold matters, how to access it (ETF vs futures vs physical), and where Bitcoin fits into the “sound money” conversation. Classroom use only
Clue 1 — Why does gold belong on our treasure map?
Select exactly three valid reasons:
Clue 2 — Bretton Woods → 1971 Break
1944: Currencies peg to the USD; USD convertible to gold at $35/oz (official).
1968: Two-tier market (official vs private).
1971: Convertibility suspended (“Nixon shock”).
1973→: Free-floating era.
- Who: President Charles de Gaulle (guided by economist Jacques Rueff).
- What: Mid-1960s France redeemed dollars for U.S. gold under Bretton Woods, reportedly even sending a French Navy vessel to collect bars.
- Why it mattered: Highlighted growing strains in the $35/oz peg as foreign central banks converted dollars to metal.
- Myth buster: “France got nothing.” False. Redemptions did occur; the drama helped set the stage for the Aug 15, 1971 suspension.
Question: In 1971, the U.S. ended which commitment?
Clue 3 — Make the Real Return ≈ +4.0%
Real = ((1+nominal)/(1+inflation)) − 1 = 3.88%
EO 6102 — Apr 5, 1933: U.S. residents ordered to deliver most monetary gold (exemptions: small collections, jewelry, industrial/dental).
Gold Reserve Act — Jan 30, 1934: Nationalized monetary gold and set $35/oz.
Legal again — Dec 31, 1974: Private bullion ownership legalized (President Ford).
Myth check: “Gold is illegal to own.” — False since 1974.
Clue 4 — Choose your vehicle (ETF vs Futures vs Physical)
Scenario A — Student Budget
$300–$1,000; small position; low ongoing fees.
Scenario B — Jeweler Hedge
~200 oz inventory; worry about near-term price drops.
Scenario C — Intraday Liquidity
Quick demo; deep order book; spreads matter most.
What is an ETF? (30-second primer)
Exchange-Traded Fund (ETF) = pooled vehicle that trades on an exchange like a stock. Gold ETFs such as GLD/IAU/GLDM are typically physically backed trusts: they hold bars in vaults; share price seeks to reflect spot gold minus fees. Liquidity comes from market makers and the create/redeem process with Authorized Participants.
- GLD — very liquid; expense ratio ~0.40%.
- IAU — lower fee (~0.25%); solid liquidity.
- GLDM — very low fee (~0.10%), smaller share price.
- GC 100 oz; min tick $0.10/oz ⇒ $10/tick. Near-24h trading.
- MGC (Micro) 10 oz; $1/tick; student-friendly sizing.
- Daily mark-to-market; leverage amplifies both gains & losses; roll months.
- Reputable dealers/mints; verify purity/weight.
- Expect premiums over spot + storage/insurance.
- Best for “store of value” framing; less convenient for rebalancing.
Clue 5 — Futures: Efficient but Spicy 🌶️
Mini P/L Simulator
P/L: +$2,000 (ignores fees/interest)
Return on Margin: +11.1%
Challenge
With the current inputs, enter the correct total P/L to open the vault:
Margin & Risk Lab — where do calls happen?
Contract: standardized size (GC=100 oz, MGC=10 oz). Initial margin is a performance bond posted up front; maintenance margin is the minimum equity you must keep. If equity falls below maintenance, you get a margin call to top back up (usually to initial).
- Silver 1979–80 (Hunt brothers): heavy buying + leverage + tight supply drove a sharp spike toward ~$50/oz before rules/margin changes and forced deleveraging crashed prices.
- Silver 2011: rapid run-up near $49/oz followed by steep reversal as margin was raised and longs unwound.
- Gold recent cycles: sharp rallies have often coincided with falling real yields, strong official-sector buying, and speculative short-covering. Leverage cuts both ways—margin can accelerate up and down moves.
Final Chamber — Fiat, Bitcoin, and Gold
Compare (plain language)
- Gold: Physical, scarce, long history; storage/premiums; low long-run correlation.
- Bitcoin: Digital asset with fixed supply schedule (21M cap); self-custody risk, high volatility; policy/reg uncertainty.
- Fiat (USD): Unit of account, legal tender; flexible supply; purchasing power shaped by inflation/real rates & policy credibility.
Quick Check (choose one of each)
Video Vault — Recommended Clips
Practice — Quick Questions
- What ended in 1971 and why did that matter for gold pricing?
- List three drivers that could lift gold even if current CPI declines.
- Why are real returns crucial?
- One benefit + one risk each for Bitcoin and gold.
Simple P/L — Same exposure (100 oz), different % returns
$ P/L is the same across ETF, futures, and a gold bar (no fees): $P/L = Δ × Q. % return depends on the capital used.
Capital used for % return
- ETF or Gold Bar: Use notional N = P₀ × Q = $4,200 × 100 = $420,000.
-
Futures: Use margin deposit M (a small % of N = P₀ × Q).
Set M: $ ≈ —% of notionalTypical initial margin is about 3–10% of N (varies by exchange/broker/vol).
Quick-set:
Scenarios
Price up to $4,500 (Δ = +300)
$P/L: Δ × Q = 300 × 100 = $30,000
ETF / Gold bar %: $30,000 ÷ (4,200 × 100) = +7.14%
Futures % (on margin): $30,000 ÷ M = +333.33%
Price down to $3,900 (Δ = −300)
$P/L: Δ × Q = −300 × 100 = −$30,000
ETF / Gold bar %: −$30,000 ÷ (4,200 × 100) = −7.14%
Futures % (on margin): −$30,000 ÷ M = −333.33%
Homework — Forecast: Gold by Nov 15
Question: What do you think the gold price (USD/oz) will be by Nov 15, and why?
- Write down your target price and 1–3 sentences explaining your reasoning.
- Base it on the drivers we covered (real yields, USD, inflation expectations, risk sentiment, flows).