Could the Trump Presidency usher in a return to the gold
standard and strip powers away from the Federal Reserve?
Donald Trump is known to be sympathetic to the concept of
a gold standard, believing it could be a good way of maintaining the
stability and value of the US Dollar.
“Bringing back the gold standard would be very hard
to do, but boy would it be wonderful. We’d have a standard on which to base
our money.”
Multiple Trump economic advisors are also pro-gold and
could advise President-elect Trump to move the U.S. monetary system back
toward sound money and the financial discipline that gold commands.
John Paulson is an economic advisor to Donald Trump known
for his fund’s investments in gold with Paulson & Co currently the 5th
largest institutional investor the SPDR Gold Trust (GLD). The appointment of
Paulson to a position on Trump’s team could also arguably bolster Trump’s
position on gold in the monetary system.
Dr. Judy Shelton, part of Donald Trump’s economic
advisory team, is also a senior fellow and co-director of the Atlas Sound
Money Project. Their mission is to promote the principles of sound
money and raise awareness of what they see as the inherent problems of our
current monetary system.
When Fortune Magazine asked her how she would propose changing monetary
policy, she responded with the following:
“I’m not opposed to a new Bretton Woods conference. In terms of gold
being involved, some people may think of that as a throwback, but I see it as
a sophisticated, forward-looking approach because gold is neutral and it’s
universal. It’s a well-accepted monetary surrogate that transcends borders
and time. If you look at the foreign reserves of the most important
countries, they keep them mostly in gold. I don’t want to read too much into
it, but it proves that gold is not some barbarous relic.”
Concerning the Federal Reserve, Trump was asked a question in a March 2015
TV interview:
Question: Let’s go back to our audience
now coming from Bob. What is your question? …[Bob]:”My question is about
Federal Reserve. What if any changes would you make to Federal Reserve and do
you think they should be audited on a regular basis?”
Trump: “Audited, absolutely. I really
think you can have it or not have it. A lot of people like it and a lot of
conservative people like it. They think there is an adjustment with interest
rates and other things. I’m not a fan. I’m not a big fan. Audit, 100%.”
What exactly is the gold standard? Here is a great video that breaks it
down succinctly:
We may not see the return to a full gold standard once Trump takes office on
January 20th, but even a small increase in the usage of gold in the monetary
system could have significant ramifications for the price. As other analysts
have pointed out, the gold price would need to climb well above $10,000 per
ounce to cover the amount M1 currency in existence (cash plus checking
accounts).
If the gold price were to reach these lofty levels and increase 8x the
current price, mining stocks are going to advance by 20X or more. With
silver at a 50:1 ratio to gold, $10,000 gold implies an advance in the silver
price to $200 per ounce.
If gold and silver prices climb 8x to 12x in the coming year and mining
stocks continue to offer leverage of 3x to 4x, we could see quality miners generate
staggering returns in the 3,000% to 5,000% range. This implies a return of
50x your money. In other words, an investment of $20,000 in top-tier mining
stocks could one day be worth $1 million!
Of course, nobody knows for sure where prices will go into the future, but
these price targets give us some perspective of the potential gains in this
market.
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