by Peter Schiff, Schiff Gold:
2024 has demonstrated why gold is worth investing in, especially for foreign central banks, who seek to shore up the weaknesses of their fiat currency by buying gold. In her newest work, former Trump administration advisor Judy Shelton argues that a return to sound money requires going back to gold.
Gold is on the rise, and so is the typical gold-standard nostalgia that has erupted every time price inflation, banking crises, and/or debt concerns have reappeared after the fall of the Bretton Woods gold-exchange standard in 1971. Certainly, the precious metal’s ascent, as usual, is signaling that all is not well.
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Earlier this year, the precious metal soared past $2500 an ounce to all-time price highs, making it one of the best-performing assets of 2024, following a price gain of 13 percent in 2023—the result of persistent economic as well as geopolitical uncertainties. More interestingly, perhaps, the World Gold Council reports that central banks have been the precious metal’s most aggressive buyers, purchasing 1,037 tons of gold in 2023 alone—the second highest annual purchase in history—following the record high of 1,082 tons in 2022. Indeed, a Gold Council survey revealed that 29 percent of central banks respondents planned on increasing their gold reserves in the coming year—the highest percentage since the World Gold Council began this survey in 2018.
A recent piece in The Times (of London) sums up the moment:
Gold, it seems, just can’t be ignored any more. The prospect of falling US interest rates, a decline in the dollar and worries about America’s debt sustainability should lead to more institutional and retail money flocking into gold… There is even talk that the long-mooted new currency set up by the expanded Brics countries will be backed by a number of assets, including gold. A century on from the demise of the [Classical] Gold Standard, which collapsed in the interwar years amid a breakdown in central bank cooperation over how to manage the metal, gold is quietly becoming a more important feature of our financial system rather than an outmoded 20th-century relic.
All of which has led to much talk about sound money, cryptocurrencies, and even the feasibility of a new gold standard, as is attested by the latest title from former Trump administration economic adviser and longtime sound money advocate Judy Shelton—Good as Gold: How to Unleash the Power of Sound Money—currently a best-seller on Amazon.
Shelton, speaking on the phone from Paris, on her way back from a recent New Delhi gathering of the Mont Pelerin Society—the free-market economics conference founded by Friedrich Hayek and Milton Friedman—remains surprisingly upbeat about the precious metal’s monetary prospects despite the myriad of setbacks over the past fifty years.
“We have the gold,” she says, pointing to the US government’s reported holdings of 261.5 million ounces—more than any other nation. “Why not utilize it?”
An inveterate sound money champion, Shelton argues that the present moment is especially propitious, especially on the international level. The fact that gold-buying by central banks has reached a near-frenzy “testifies to good prospects for the serious consideration of a new proposal,” she says.
And she has one, of course: a well-articulated plan to reaffirm gold convertibility for the average American for the first time since the days of the Classical Gold Standard (1815-1914); albeit beginning exclusively through the ownership of gold-linked US Treasury bonds. To Shelton, the right of dollar-to-gold convertibility—her end goal for the entire US monetary system—is essential: it wouldn’t just signify fiscal and monetary rectitude; it “provides the ultimate simple rule for regulating the money supply in accordance with individual rights and free-market principles,” one of the book’s key arguments.
