In Go(l)d We Trust!

“In God We Trust” first appeared on the two-cent piece in 1864 and has appeared on U.S. paper currency since 1957. Citizens today are voicing concerns that the motto doesn’t speak for “all” Americans. However, it should have been far more concerning to Americans that Nixon took us off the gold standard in 1971, but hardly a concern was raised. Such a motto may be offensive to a few, but our removal from the gold standard is undeniably detrimental to all, as it certified the dollar to be a fiat currency and ultimately insured its demise. At this point, “In Gold We Trust” serves as a far more universal motto and certainly far less offensive to anyone.  Average annual inflation since 1971 has been 3.88%, meaning that a 1971 dollar has the purchasing power of $6.46 in 2020. Following Nixon’s removal announcement, gold opened the following day at $43.00 per ounce. Given the rate of inflation, if gold and the dollar were still tied together today, gold would have a value of $278.

Instead, gold closed yesterday at $1,721. That’s not a 646% increase. It’s more than a 4,000% increase. There are many reasons for the dichotomy, but the most important and the one that’s going to keep the value of gold rising over the long term, regardless of anything else, is scarcity. There is only so much gold in existence and until we harness the power of a supernova, we aren’t going to be making any new gold. Meanwhile, the U.S. Treasury is printing new “money” like it is going out of style. The Trump Administration was on course to add $5 trillion to the national debt over its first term, but that was before the coronavirus pandemic. The $2.2 trillion CARES Act and subsequent programs are going to seriously add to that deficit.  Moreover, the resulting recession is going to exacerbate damage caused by the debt even more.

We’re in for difficult times. The stock market has a far better chance of losing another 50% long before it can post a gain of 50%. As “safe” as Treasury instruments are believed to be, yields are practically non-existent. Considering inflation and increasing that’s coming, they’re already negative and growing more negative. Unlike gold, the dollar has no intrinsic value. Any value it purports to have is backed only by the full faith and credit of the U.S. government. Considering that the government seems to subscribe to the belief that they can print money “at will” without ramifications, it seems a dangerous gamble. If the Fed continues to monetize government borrowing by purchasing the debt issued to finance expenditures, then there’s no reason to think we can’t increase the debt to $5 trillion a year instead of per presidential term.

Debt acceleration from that point, becomes exponential and the ensuing inflation, as well. Pardon the pun, but gold and other precious metals shine their brightest during times of inflation and at this point, there’s no way to avoid the coming inflation. We can only reduce government spending or raise taxes in order to avoid an economically lethal version of hyperinflation. Protect your assets, family and legacy now. Call the experts at American Bullion, while prices are still absurdly low. Call (800) 653-GOLD (4653).

Although the information in this commentary has been obtained from sources believed to be reliable, American Bullion does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice. American Bullion will not be liable for any errors or omissions in this information nor for the availability of this information. All content provided on this blog is for informational purposes only and should not be used to make buy or sell decisions for any type of precious metals.