Gold Is Sending Us A Message

Gold is sending the world a message. While much of the world is getting it – and understanding – most Americans are not; and may soon suffer the consequences.

In 1971, President Nixon took the US dollar off the gold standard. At the time, total US government debt was around $100 billion. Today’s dollar is backed by nothing more than political promises. With the gold shackles removed, politicians have spent us into oblivion, debt over $40 trillion, projected to top $50 trillion by 2030.

British pundit William Rees-Mogg explained, “Governments lie; bankers lie; even auditors sometimes lie: gold tells the truth.”

Friend Rich Checkan, President and COO of Asset Strategies International grabbed my attention when he wrote:

“Would you believe me if I told you that everything today costs less than it did twenty-six years ago?”

Rich compares 2000 to today:

“Here are the prices of a few key items as of the turn of the millennium in 2000…

I can only imagine the thoughts running through your head right now. All the prices are higher. How on earth can everything be cheaper? ….

One ounce of gold buys….

If all you did was put some of your money into gold in the year 2000 and did absolutely nothing, you could buy 331% more gasoline today, …. college tuition would be 72% cheaper, …. Your new home would be 135% cheaper…. And your Ford F-150 would be 84% cheaper….

Prices of everything that matters have come down over the past 26 years substantially… in terms of gold.”

In 1912, J.P. Morgan boldly testified before Congress: “Gold is money. Everything else is credit.” Our US currency clearly states, “Federal Reserve Note,” a promise to pay – not money but credit.

In times of high inflation, gold historically skyrockets well ahead of inflation. We saw this during the Carter years:

Before he became the head of the Federal Reserve, Alan Greenspan was very outspoken about gold:

“The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit. In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. Deficit spending is simply a scheme for the hidden confiscation of wealth.

Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.”

Since the Carter years we have seen the gold price spike and then retract once things settle down. Goldprice.org provides the data:

While gold offers terrific inflation protection, for decades it may remain dormant.

In 1976 Gold was around $140.00/oz. It spiked to $850, in January 1980, then drifted down to a low of $253 in 1999. The next all-time high ($867.90) came in 2008. It took 28 years for gold to surpass the previous high.

In 2011, three years later, it shot up to a new all-time high, $1917.50. Nine years later, 2020, it set the next all-time high, shooting to $2,075.00. That didn’t last long, in 2026 it set a new record, $5,163.56.

It took gold almost 30 years to double from the 1980 price. Then it doubled again in six years. Historic price spikes with each time frame getting shorter.

The Message….

Herbert Hoover explains, “We have gold because we cannot trust government.”

In 1980, when Fed Chairman Paul Volcker dealt with double digit inflation, things were different. Government debt, as a percentage of Gross Domestic Product was around 30%, very manageable in today’s terms:

It took ten years to double, leveled off for 20 years, then doubled again since the bank bailouts. Debt to GDP at current levels is considered “unsustainable.”

Investment implications

Core Holdings. For years, Chuck Butler and I have preached that 10% (or more) should be invested in gold; called “core holdings.” If you have core holdings, likely your total net worth has risen to new highs. What a fun ride….

Gold has dropped over 20% since setting a new high in January. How much further will it drop? How long before it starts a new upward trend? None of us know. While the downturn is unnerving, and easy to play the coulda/woulda/shoulda game, let’s not forget the goal.

“Core holdings” are insurance – hedging against a catastrophe – double digit inflation or more. While we may wish we sold some and took profits, that’s not why we own it.

Take comfort in two areas.

First – Hope things never get so bad that our dollar becomes so worthless that we are forced to sell gold to pay bills. While our gold holdings may have hit an all-time high, and is now correcting; be thankful if you can still pay the bills without having to sell.

Second – What a confidence builder. As Rich pointed out, gold did the job. When gas is $45.00/gallon and an F-150 is $450,000 gold will still be there. Gold once again has proved it is doing the job; hedging against a currency collapse.

While gold may continue to decline, there is a reason central banks are all buying.

Our government is borrowing and spending unlike anything the world has seen before. Friend Chuck Butler, quoting the Mises institute, explains:

“There are four theoretical exits from a debt spiral: default, austerity, growth, and inflation.

Default is unthinkable to the people whose power rests on the debt’s sanctity.

Austerity is unthinkable to the people whose power rests on spending.

Growth fast enough to outrun six-percent-of-GDP deficits is a fantasy no honest forecaster will sign.

The likely path is a blend of evasions and whatever the blend, its active ingredient is inflation, the exit with no constituency and no ceremony. It is not a policy anyone will announce. It is the station at the end of the line.”

If you have core holdings, don’t sweat the price fluctuation, take comfort in having insurance to protect your life savings. If you don’t feel you have enough insurance, buy on the dips.

Gold for investments. Gold mining stocks have fared very well of late. MarketWatch provides the Dow Jones US Gold Mining Stock Market Index:

In January 2024, the price was $1,460. The price more than tripled topping $4,907 in February 2026. Investors who want to play the market have done very well with mining stocks, hopefully taking some nice profit along the way.

The challenge is to mentally, and physically, separate your speculation from your core holdings. The latter is insurance against a catastrophe that hasn’t happened – yet.

When Roosevelt devalued the dollar, he first confiscated gold. Fortunately, citizens are now allowed to own gold once again. While we don’t know what action a future desperate government will take, I can’t imagine citizens will be fooled a second time around.

Congressman Howard Buffett explained what happened last time:

“Before 1933 the people themselves had an effective way to demand economy. Whenever the people became disturbed over Federal spending, they could redeem their paper currency in gold, and wait for common sense to return to Washington.”

Today common sense in Washington is an oxymoron….

We enjoyed taking some nice profits on our speculative holdings during the run up, not lamenting about market timing. I’m slowly building things back up. Too soon? Maybe, but the circumstances surrounding the declining dollar have not changed.

If looking at your “year to date” number gets frustrating, look back two years and feel much better. As a morale boost, I go to the income side and see the profits from guessing right with our speculative holdings.

Much like an earthquake, there are a few subtle warning signs before the big one hits. I feel the gold price swings, coupled with new highs being set in a shorter time frame is a warning. I may be wrong but prefer to err on the side of caution; protection of our life savings is the goal.

It makes little difference which political party is in power. Governments lie; gold does not! Politicians of all ilk broke it, and don’t have the means or will power to fix it. Throughout history governments have had to revalue their currency, and reset. Some, hearing the message gold is sending will take heed, sadly others will not, and have to totally start over.

Life will go on, just as it did after the Great Depression. Our country will get through it. I’m a firm believer in American values, work ethic, innovation and spirit. Each generation complains about the youth, but compared to the world, we still shine brightly.