PALANTIR BUYS $50 MILLION WORTH OF GOLD - What this means for the price of gold.

If you're not aware Palantir is a data analytics software company, which recently went public. Back in September of 2020 very quickly after going public their stock price tripled, came back down, and has been volatile and since then but largely range bound. One of the reasons that investors have been apprehensive about investing in Palantir is simply due to their narrow customer base, because until recently, pretty much their only customer was the government; various departments inside the US government but now though their customer base has been growing quickly, and it's especially focused on young startup companies especially technology companies. Palantir likes to do things differently they view themselves kind of like artists and this company culture likely descends from Peter Teal, the founder of Palantir was a legendary investor inventor, entrepreneur billionaire.

One thing that Palantir has done that many companies do not do is invest in many of their own customers, along with their recent acquisition of gold they announced investments in many of the companies that actually buy software from them. This was made possible due to a lot of the money that they raised from going public back in 2020. Second thing that they've done with a lot of that money that they raised when they went public, is deleveraged, in fact, they're debt free, which makes them really stand out as kind of an oddball in 2021 among publicly traded companies especially technology fast growing companies.
And finally, what this article is about. The other thing that they did with some of this cash was make a big purchase of gold to be exactly purchased about $50 million worth of 100 ounce gold bars, these gold bars are being held by a third party storage service, and although the exact details are not know , but it sounds like this gold is being stored as allocated gold as opposed to unallocated, which means that they actually own the gold, and they're simply paying a vault or a storage service company to store it safely and securely for them, I locate a gold like this is different than most gold ownership which we call Gold owership, which is unallocated gold, which means that you pay a company who whenever you decide or if you ever decide to request them to send you that gold. They don't actually have it on hand what they will do is they'll go out into the market, they'll buy gold from somebody else, and then send it to you. This is a very cheap way to get exposure to the price of gold because they don't have to pay anything to store the gold, they're just banking on the fact that you'll never actually request to be sent to you, allocated gold is different because you have to pay somebody to actually store the gold that you outright own legally, knowing that you have to pay a lot to have somebody actually store and protect and secure that gold, so you might be thinking Palantir must be spending a ton of money to have $50 million worth of gold, protected, but $50 million worth of gold doesn't actually take up that much space which is one of the nice things about gold. It's the value density that it brings. $50 million worth of gold is not as big. 100 ounce gold bar is about $175,000 at today's gold prices which means that if you're putting $50 million into it, you really only need about 286 bars, about that big, you can fit that in your average coat closet, easily, so why in the world would any company, let alone a fast growing technology company want gold held on their balance sheet want to buy any gold for their corporate treasury at all.

WHY PALANTIRE INVESTED SO MUCH IN GOLD
The official reason given by Palantir is that they're preparing for future black swan events, and this makes sense because there are very few stores of value that are not at the same time your asset as well as somebody else's liability, meaning that your ability to store your value depends on somebody else holding up their end of the deal, if you hold bonds which many companies and many people do as a store of value, you are depending on the person who owes you that money to not default and actually give you that money back. If you hold fiat cash, you are depending on the central bank or the government to not inflate away the value of the purchasing power of that currency but gold just sits on your balance sheet and you do not have to depend on a third party to hold up their end of the deal. In order for you to retain your purchasing power, but paired with the knowledge that Palantir has completely be leveraged. It might not make that much sense on the surface, as to why they would buy gold, because gold is looked at by many as a hedge against future inflation. The other thing that's looked at as a hedge against inflation or way to profit from inflation really is to be leveraged is to use debt to purchase assets. This is because if you know the value of your currency in the future is going to be lower than that value is today, it makes sense to borrow dollars, with their current purchasing power invested in a business use that to buy an asset in the future then those dollars, lose their value they lose their purchasing power. And so when you have to repay that debt in the future. You're repaying that debt with dollars that are worth less than they were when you ever initially borrowed that said another way, inflation puts more dollars into circulation that means incomes go up, that means in the future we have to repay that debt. the old dollar amount that dollar amount doesn't change, it's easier to get your hands on all those new dollars that are in circulation because your income has gone up as a result of that inflation therefore it's easier to pay off that debt inflation erodes the value of debt just as a rose of value, or the purchasing power of that money so if gold is usually used as a hedge against inflation. Why would they do leverage. Well, There are many who right now are not scared of inflation, there are many who are scared of deflation, and rightfully so, because of the central banks around the world decide to put a break on the easy money train it could very very quickly trigger a deflationary death spiral and in the face of deflation. The last thing that you want is any debt because this is the opposite of inflation deflation means money becomes more scarce, not more abundant, it makes it harder to pay off debt, set another way, it takes far less money to buy things because things get cheaper, all the stuff gets a lot more valuable relative to all of the money. This makes debt far costlier to pay off because it's harder to get your hands on new dollars, the debt amount that you owe doesn't change, but incomes drop. So because of these two things, it looks like Palantir is not trying to bet on one outcome or another bet on inflation or deflation, it looks like they're simply trying to diversify against any potential Black Swan event, if we get deflation great we've got no debt, we're better than literally every other publicly traded company, pretty much, if we get inflation, great, we're one of the only companies that has gold, and especially in light of the fact that they've been diversifying their customer base, investing in innovative startups, improving their fundamentals by not only deleveraging but also increasing their free cash flow, it looks like they just want to make sure that their performance is independent of any macroeconomic variables any monetary or fiscal policy, that takes place.

EFFECT OF THIS LARGE GOLD PURCHASE BY PALANTIR ON THE PRICE OF GOLD
Is this a big deal that palantir bought that amount of gold? Is the fact that they bought gold a big deal. Well, by itself, no, as alluded earlier, it's really not that much gold, it's 286 gold bars and $50 million. Sounds like a lot of money until you compare it to the cash hoard of $2.3 billion dollars that they're sitting on right now is why you don't see the price of gold skyrocketing as a reaction to news like this like we saw happened to things like Bitcoin many times last year when companies were announcing that they were going to be adding Bitcoin to their balance sheets, the total gold market is just far too large, it just absorbed stuff like this, it doesn't make an impact or dent at all, but this may be a sign of times to come, it might be an indication of changing tides, because if this is the sign of upcoming trend, institutions and big money allocating a small percentage of their balance sheets of their treasury into gold would have a substantial impact on the price of gold, because if you look at the balance sheets of every publicly traded company every 401k every pension every professionally managed investment portfolio, you're gonna find basically three things, Primarily stocks, bonds, and a little bit of cash. That's it. And so if we do start seeing more of this where companies or portfolios decide they are going to put 1%, 2% in gold, just as a hedge against uncertainty, just as a little bit of diversification, for our cash ballots, even if they do some of that you know one or 2% gold one or 2% Bitcoin, just start allocating it out a little bit differently, that would be a huge tailwind behind the price of gold, so big in fact that you could even trigger a run on the banks the unallocated paper markets for gold might collapse as a result, now they're already winding down due to the effects of Basel three but this would be just the nail in the coffin, and the price of gold could really skyrocket as a result as of now, as an isolated event really not that meaningful but if it's a sign of institutional money stampeding into gold, that could be a big deal.

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