Photo by Dmitry Demidko on Unsplash
 

Gold Bugs have been preaching the demise of fiat currency for decades. Although fiat currencies like the US Dollar still have utility, here’s why Gold Bugs can now claim victory.

After rampant pandemic money printing, the Fed and the US Treasury had to reconcile with rising inflation. So the Federal Reserve raised interest rates and committed itself to an era of monetary tightening. Powell’s goal was to reduce the Fed’s balance sheet. In turn, they would lower inflation and provide for what they called a “soft landing” for the economy. Except gold began to tell a different story.

Gold and Federal Fund Interest rates have an inverse relationship. When the Fed raises interest rates, the value of gold should go down or flatline.

It’s a similar relationship between Treasury Bonds and Gold. They have an inverse relationship. When bond prices go up, gold should go down. So when the Fed started raising interest rates, the same old story didn’t happen. The price of gold went up. This was gold’s first signal that this time, something was different in the debt-driven economy.
 

Two years later, the price of gold had risen high enough to exceed the return on bonds over the last 50 years. The first time this has happened since 1979, except this time the road is different. There’s no petrodollar to run of too, and the United States’ debt level shows there’s no more money to fight the wars required for empire.
 

Another two years go by, and the perils of a fiat-based monetary system continue to show. Gold is telling us that stock market prices are becoming as unreliable as bonds. Last week, gold began to outperform the S&P 500.
 

The prophetic words of the Gold Bug still hold true. The end of fiat is closer than we think it is. Gold is telling up in bonds, and gold is telling us in stocks. A new gold-backed system is coming.

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