The world’s most successful paper money experiment had an impressive run.
Think about it… it’s pretty crazy.
Since 1971, the year President Richard Nixon "temporarily" ended gold convertibility, the entire world has been holding its breath and pretending that paper (and digital) currency are a fine store of value, medium of exchange and unit of account.
I believe historians will look back at this ~55 year era with wonder. How did monetary authorities keep the charade going for so long? Why did people go along with it? Why didn’t everyone buy gold at $1,000 or $2,000 or $3,000 – especially as they all watched the purchasing power of their fiat currencies melt away year after year?
For the authorities, the system makes sense. They get to endlessly fund whatever they want without having to raise taxes or grapple with difficult budget choices. But for the rest of us? The era of dollar hegemony has been a total disaster.
Against gold, every major currency has absolutely crashed since 1971.
The best performer has been the Swiss Franc, which has “only” fallen 95% against gold.
And as exciting higher gold prices are for us as gold investors, we really should be looking at it as our DOLLARS getting destroyed, as opposed to gold going up in price. It’s a totally backwards way of looking at things. But I believe things are changing – and that gold will once again be centered as the monetary king.
I’ve been talking about Treasury Secretary Bessent since February, when he mentioned “monetizing the asset side of the balance sheet” – which I think most people agree means he will revalue gold.
Among gold investors, this announcement was like pouring kerosene on a tire fire. Gold prices soared. Gold stocks too, after years of lagging moves in gold started to pick up steam.
But even Bessent is unable to revalue gold, he doesn’t have to. The world is already doing it in real time. Every major central bank has been loading up on gold for a decade. Even small nations like El Salvador are buying gold too.
It’s becoming obvious to more people and nations every day that gold is the only fire escape – the only lasting value proposition for them to get into as fiat systems continue to spiral downward.
I think we’re looking at the unwinding of a 55 year old game of the prisoners dilemma – where both the dollar stewards at the Fed and Treasury, and the people who engage in dollar denominated commerce are choosing to defect.
The Trump administration is going to push all of the buttons it can to devalue the dollar. And everyone else is buying gold like crazy to avoid seeing their dollar positions wiped out.
With today’s rate cut announcement and the plan for two more rate cuts in 2025, I think it’s a tacit admission from Fed Chair Jerome Powell that he’s caving to Trump’s dollar devaluation plan. He might not like it, but his hand has been forced by weak job numbers.
As I hinted at in Monday’s issue, we’re now seeing a small correction since Powell’s announcement. Gold is down ~1% since the 25 basis point rate cut was announced.
It could be the market is disappointed the cuts weren’t larger – but as I mentioned on Monday, we now have a compelling buying opportunity.
This minor dip lines up perfectly with my latest research project that I just released today.
It’s called The Return of “The King” and it details exactly which stocks I think you should own to benefit from the next steps in this gold bull.
Check it out by clicking here now.
But don’t wait: I don’t know how long this correction is going to last, and it’s just as likely to reverse as the market realizes what’s coming next for gold.
Best,
Garrett Goggin, CFA
Chief Analyst & Founder, Golden Portfolio