A Return to the Gold Standard

Honestly, when I see all the ads on TV for buying gold it makes my head hurt.

Not because I don’t believe it’s important to own gold, but because many of the companies advertising gold try to scare people into buying and, in the process, paying too much for an important commodity.

In other words, many of the ads insult our common sense. And, by so doing, I fear many folks who should have some gold tucked away have shied away from buying it because of the ads.

So, in one sense, all those ads do more to confuse the question of whether we should own gold.

Personally, I believe that everyone should own some gold. But I’ve shied away from talking about it in an advisory because I’ve been concerned that I would sound just like one of the “know-it-alls” in the ads I see on TV.

That’s why I was very happy this week to see that former presidential candidate Steve Forbes publicly stated that there is a good chance the United States will return to the gold standard. And, truth be told, he’s not the only one. Ever since the start of the Great Recession, there has been more and more discussion about a return to the gold standard.

OK. Let’s first take a look at what Forbes had to say this week in an interview with Newsmax and then examine what a return to the gold standard could mean for the price of gold.

In, “Steve Forbes: We Will Return to Gold Standard,” Newsmax provides two videos of Forbes discussing why the U.S. will have to go back to the gold standard.

Here’s a bit of the accompanying article:

“Business mogul Steve Forbes says that not only is a return to the gold standard a realistic option, but ‘circumstances’ in our economy will necessitate it.

“’We were on the gold standard for 180 years in this country’s history — did very well with it,’ Forbes told J.D. Hayworth, John Bachman and Miranda Khan on “America’s Forum” on Newsmax TV on Monday.

“’If we’d been on a gold standard since 1971, when Richard Nixon took us off the gold standard, today our economy would be 50 percent larger if we’d just maintained historic growth rates we had for the first 180 years of our existence,’ the chairman and editor-in-chief of Forbes Media explained.

“The gold standard is a monetary system in which the value of currency is equal to a fixed amount of gold. The currency can also be converted into gold.

“’Gold gives money . . . stability just like the ruler measures length, the clock measures time, a scale measures weight,’ Forbes added. ‘A dollar measures value and when the value is stable, you get a lot more investment, a lot more growth, a lot more opportunity.’

“Without the gold standard in place, the dollar has grown increasingly unstable, even though there have been ‘periods of strength,’ Forbes says.

“’When you have an unstable dollar, you get more speculation,’ he explained. ‘You get the kind of thing you saw with the housing bubble, and so that spells trouble for all of us.’”

Trouble indeed!

What will happen if Forbes is correct and the U.S. returns to the gold standard?

While no one can predict the exact price – and there is always the possibility that the price could go lower – most “experts” agree that the price of gold could jump five to six times (or more) from whatever the price is at the time the return to the gold standard is announced.

In fact, even speculation of a return to the gold standard could push prices up dramatically. In other words, those who own gold when serious talk about a return to the gold standard begins could see the value of the gold they own skyrocket.

Most important, since the whole purpose of returning to the gold standard would be to stabilize the dollar, it will be too late to buy gold once the decision is made because the price will most likely jump and then settle in at a stable figure.

Bottom line: I’m not an investment advisor and, obviously, everyone’s situation is different. But Forbes is an intelligent man who understands money better than most, so his view that a return to the gold standard will happen is worth considering.

If you agree with him, do a bit of research (after all, this is the Self-Reliance Institute!) and investigate what a return to the gold standard could mean for the price of gold. I think you’ll find what I did – that the price could rise dramatically.

Let me know what you think!

Do you think Forbes is correct? Do you own gold? Do you think gold is a good investment? Do you think gold is a good commodity to own in case there is a collapse in the monetary system of the U.S.?

Email me at [email protected] and share your thoughts.

Be safe and secure,

Rob Douglas