This year clues the 50th anniversary of the finish of the gold standard in the U.S. In respectable 1971, president Richard Nixon official unpegged the U.S. Dollar indigenous gold, meaning the greenback was no longer convertible right into bullion. Overnight, the dollar came to be a free-floating currency, measurable just by comparing it to other human being currencies.

And yet there were still limitations on exclusive ownership of gold coins, bars and also the like. It wouldn’t be till President Gerald Ford signed a invoice in December 1974 the Americans might freely buy and trade bullion, because that the very first time in over 40 years.

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A lot happened as a result. That price no longer fixed, gold exploded 385% indigenous the end of 1974 to 1980, when the steel topped the end at $850 an ounce together the U.S. Coped with historic levels that inflation.

Over the previous 50 years, gold has actually expanded more than 46 times, through a compound yearly growth rate (CAGR) of around 8%.

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The ability to trade gold openly has clear been an excellent for investors. Today, gold bullion is among the most liquid legacy in the world, its everyday volume was standing at more than $145 billion, follow to the civilization Gold board of directors (WGC). Just the S&P 500 and also U.S. Treasuries profession more—but not by much.

The age of Runaway Debt

The drawback is that, in the years because the finish of the gold standard, there’s to be a far-reaching and growing lack of self-control when it comes to government spending. Before 1971, there to be a natural limit to exactly how much money can be printed. New issuances were dependent ~ above the amount of yellow sitting in the nation’s coffers.

Today, v the dollar backed no by a tough asset however by the “full faith and credit” that the U.S. Government, the commonwealth debt is closeup of the door in ~ above an expensive $28 trillion, which is more than 130% that the dimension of the U.S. Economy.

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To provide you part idea of how substantially times have actually changed, federal debt in 1960 was just a little over fifty percent the dimension of the economy.

The debt is expected to surge even an ext in the comes months now that Joe Biden has been sworn in as president and also Congressional manage has change in the Democrats’ favor. Biden, that turned 78 in November, has called for a $1.9 trillion economic relief package that include $1,400 checks for every American adults.

I’m no advocating that we return to the gold standard. It’s probably no much longer feasible. According to the Treasury Department, official gold reserves at this time stand at around 261 million ounces, because that a sector value of some $493 billion.

That’s simply not sufficient metal to assistance an economic situation as big as the U.S.—not uneven the price that each ounce of gold was solved at other outrageous prefer $100,000.

There’s to be some conversation of do Bitcoin a to make reservation currency. Like gold, its it is provided is limited, and also it has the potential to range up. But at the moment, cryptos are far too volatile.

So because that now, we’re left v the present monetary system of endless money-printing, which consequently makes every U.S. Disagreement less an useful and each ounce of gold more valuable.

The increase of modern Monetary theory (MMT)

What this is every pointing toward is the rapid fostering of modern monetary concept (MMT).

In short, proponents of MMT speak that federal governments that worry their own currency, as the U.S. Does, are free to invest as much as castle want, nevertheless of the lot of revenue generated. And if the government ends up v a security deficit, it can just print more money come cover the difference.

Isn’t this what we’re currently doing? In 2020, the federal federal government spent a total of $6.55 trillion, in spite of it collecting “only” $3.42 trillion—about fifty percent of that—in tax revenue.

What’s more, the quantity of M1 money supply—which consists of the most liquid and also readily available forms that money—was up an unmatched 67% in December 2020 compared to the exact same month the vault year.

As ray Dalio, billionaire founder the Bridgewater, the world’s greatest hedge fund, has said a variety of times, “Cash is trash.”

Our Favorite means to acquire Exposure come Gold

So whereby does Dalio placed his money instead? A look in ~ Bridgewater’s third-quarter filings reveals big positions in physics gold and also gold mining companies. In ~ 11.6%, the gold-backed SPDR Gold to trust is the fund’s second-largest position. The fifth-largest position, in ~ 3.4%, is the iShares gold Trust.

Among the yellow producers in Dalio’s portfolio room Newmont, Yamana Gold and also Freeport-McMoRan.

Besides the securities already mentioned, we likewise like to get exposure come gold and precious steel miners via the aristocracy companies.

Our 2 favorites the follow the royalty and streaming model, Franco-Nevada and also Wheaton priceless Metals, have impressive track documents of outperforming bullion and gold miners over multiple time periods, in bull and bear markets.

Below, you deserve to see the Franco substantially beat yellow and senior producers during periods when asset prices to be rising as well as falling.

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Wheaton an in similar way performed fine over multiple periods. For the one-year, three-year, five-year and 10-year periods, Wheaton crushed not just gold and also silver but additionally miners and also the famous VanEck Vectors gold Miners ETF.

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These solid track records have resulted in the carriers consistently returning value to shareholders. Together of September 30, Wheaton had an remarkable $1.2 billion asserted in dividends. Franco, meanwhile, has had actually 14 right years of dividend increases, v $1.4 billion paid out since its 2008 early public giving (IPO).

Both service providers are scheduled to report in early March, which i’m eagerly awaiting.

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Frank Holmes is the CEO and also chief invest officer of U.S. Global Investors. Mr. Holmes to buy a regulating interest in U.S. Global Investors in 1989 and became the firm’s chief invest officer in 1999. In 2006, Mr. Holmes was selected mining money manager that the year by the Mining Journal, and also in 2011 he was called a U.S. Metals and also Mining "TopGun" by Brendan timber International. In 2016, Mr. Holmes and portfolio manager Ralph Aldis received the compensation for best Americas Based fund Manager native the Mining Journal. That is additionally the co-author ofThe Goldwatcher: Demystifying gold Investing. More than 50,000 subscribers follow his weekly commentary in the award-winning Investor alarm newsletter and Frank talk blog, i m sorry are check out in over 180 countries.