The Financial Times proclaims in a banner headline, “Gold is back,” and its “surge may herald a whole new world.”

According to a recent report from Citibank, gold will “shine bright like a diamond” in an odd mix of mineralogical and metallurgical metaphors. Grammar aside, Citi analysts expect the price of gold to increase to over $3,000 per ounce by the end of 2025.

With similar bullishness, soothsayers at Goldman Sachs predict $2,700 gold by year’s end, well above the recent mid-April high of just over $2,400.

I could continue and list other fist-pounding forecasts for gold by big-name news sites and investment houses that augur higher prices for our favorite metal.

Another way to say it (except they’re not actually coming out and saying it) is relative to precious metals, the dollar is rapidly declining in value and will continue to do so.

Here’s something else: it’s not just that we have all these bullish predictions of higher gold prices. It’s that precious metals are even being mentioned in mainstream media, and the recent upward price moves are front-page news. I’ll expand on all of this in just a moment.

Meanwhile, here at Paradigm Press, we’ve covered gold and silver for many years. We often write about the value of precious metals and how to invest in them either as physical metals or via mines and royalty plays.

If you’re a long-time subscriber, you're already well ahead of current thinking. If you bought physical metal in the past couple of years, you’re in tall cotton just now. Or, if you’re new to the franchise, you’ve come to the right place for solid insight, analysis, and investment ideas.

Newfound Interest After Many Years

This newfound media and institutional interest in gold, in particular, comes after years of neglect toward the yellow metal. Indeed, the collective mainstream of economic, banking, investment, and academic establishments has long treated gold harshly.

Even when gold has its periodic good days, the world’s monetary and banking bigshots view the substance as just another pet rock, an irrelevant artifact of a long-lost gilded age (figuratively, if not literally). In Washington, D.C., within the Treasury and Federal Reserve Buildings, gold is an annoying adjunct to the finely tuned, highly integrated world monetary system. And no serious government official ever wants to speak about what’s inside the vaults at Fort Knox.

But considering the recent pro-gold headlines, it's fair to say that something has changed. Doubtless, part of the new attitude is how people “talk their book,” as the saying goes.

We’re in an era when large sums of money are obviously moving into gold. Central banks, large institutional investors, wealthy individuals, and others are buying gold, and individuals are even buying, as we see with the news that Costco has sold over $200 million of gold ingots to retail customers every month lately. Something is happening, yes?

Thus, big media and banking houses like Citi, Goldman, etc., must position themselves along the pathway of the funds to take a few cuts along the way. Hey, it’s business.

“Barbarous Relic?” Smile When You Say That…

Still, for all the current rah-rah about gold, there’s that legacy of past disdain toward the metal. It’s best summed up in dismissive comments that we’ve probably all heard on occasion, along the lines that gold is a “barbarous relic.”

That’s actually a misquote of economist John Maynard Keynes, who in 1923 wrote that “in truth, the gold standard is already a barbarous relic” (see A Tract on Monetary Reform, ch. 3.) So to be accurate, per Keynes, the gold standard is a barbarous relic, not gold itself.

Even on that point, though, Keynes was wrong. Over the past century, history demonstrates how an unbacked, unanchored currency (aka fiat money, issued with naught but political backing) tends to lose value (lose most of its value, actually) over time due to government overspending and long-term inflation.

Along these lines, consider the true value of an ounce of gold. And no, it’s not necessarily reflected in the daily price quote in terms of dollars, yen, pounds, euros, etc. It’s better to look at the value of gold as inherent in the metal itself, the idea of “gold is money,” which is what intelligent people used to think.

Begin with the immutable fact that an ounce of gold is always worth an ounce of gold. More specifically, let’s look at this beautiful U.S. gold coin from 1923, from back when Lord Keynes made his famous comment. It’s a $20-face value St. Gaudens “Liberty” from that era, weighing just over an ounce (1.179 oz., to be exact):

1923 U.S. St. Gaudens $20 gold coin. Courtesy USACoinbook.com.

This coin was standard-issue U.S. currency in the time of Keynes, produced and distributed by the U.S. Mint, and widely used in circulation both at retail and in banking. You could spend it in the U.S. or across the world, anywhere, anytime, no questions asked. People everywhere would take your gold.

And back in 1923, this gold coin was worth the grand sum of… $20! Although, to be sure, $20 in 1923 was quite different from $20 today, and that’s among the keys to understanding here.

According to the U.S. Bureau of Labor Statistics, at a site called “CPI Inflation Calculator,” $20 from 1923 requires almost $370 today to offer the same purchasing power as a century ago. In other words, per our federal government, that $20 from 1923 has lost over 94% of its purchasing power over time due to inflation.

And how about a different method of comparing value then-versus-now? Because over the past 101 years, this 1923 gold coin has gained in dollar value to where it's advertised today on, say, eBay in the range of $2,600 to well over $3,000, depending on quality, or what’s called “mint state.” 

Aside from nicks, dings, scratches, or perhaps a bit of tarnish over time, nothing else about the 1923 coin has changed. The coin contains .9675 troy ounces of gold, and overall, the composition is 90% gold and 10% copper, the latter added by the mint to harden the alloy. Over 100 years later, it’s the same piece of metal.

That old 1923 coin has just shy of an ounce of gold, making the metal worth about $2,300 today. Do the math; divide by $20 to get 115, which is more than the 94% decline per the U.S. government statistic. The difference between the two numbers reflects the vagaries of calculating the government CPI versus an exact market price for gold.

So, we’re back to the idea of holding gold in hand over the long haul versus trusting the government’s currency. And still, some people say that gold is a barbarous relic, eh? Yeah, right, professor. We should all have such barbarous relics in our pockets or strongboxes.

What’s Driving the Gold Move?

Okay, enough history and theory. Let’s now address some reasons why gold has recently been rapidly rising in dollar terms. Again, we return to the earlier point that gold is gold; the metal doesn’t change. But what does move is the relative value of dollars in which gold is priced. 

That is, at one point last fall, an ounce of gold posted a price of about $1,850, and in the second week of April 2024, that same ounce traded at over $2,350, a move of over 27% in about six months. Clearly, the dollar is falling from favor relative to gold. 

What happened? Perhaps we’ve reached a tipping point of so-called “full faith” in the U.S. government and its currency. 

Just consider the U.S. national debt of well over $34 trillion, which accumulated in the past two decades under Presidents Bush, Obama, Trump, and Biden. People everywhere have watched this debt monster grow, and now, at this point — the early innings of a looming monetary transformation — smart money is ditching dollars and moving into gold. It’s a de-risk and safety trade in many respects.

U.S. government, quarter-century national debt blowout. Courtesy St. Louis Fed (FRED).

So, there’s all this national debt, plus the fact that it’s growing like gangbusters. In fact, current growth in the debt is in the range of a trillion dollars every three months or so, courtesy of the Biden administration/Congressional spending machine. And yes, it’s bipartisan.

This brings us to a related issue: the interest payable on the debt, which has grown immensely based on the Federal Reserve's rising rates in the past two years. Currently, interest on the debt is in the range of a trillion dollars (a thousand billion bucks) every six months or so.

U.S. interest paid on the national debt has accelerated recently. Courtesy St. Louis Fed (FRED).

To illustrate the size of just the interest payout (i.e., excluding the deficit spending that grows the debt as well), March 31 marked the end of the second quarter of fiscal year 2024, and in just that timeframe, the U.S. government had paid out over a trillion dollars of interest, an amount which exceeds the entire defense budget.

The long and short is that the U.S. is deep in debt. That debt is growing rapidly, while interest payouts are well into the ruinous phase. The U.S. economy and tax base cannot support this.

Another way to say it is that the U.S. debt position is unsustainable, and something must give, sooner or later. At some point, the U.S. will likely experience a currency crisis. Again, the smart money knows this and is moving into hard assets like gold (and silver, other minerals and metals, energy, freshwater, land, and other “real” things) to retain value over time until the economy and society emerge from this hurricane.

Meanwhile, as if the gargantuan debt and interest levels are not bad enough, another hit to the strength and credibility of the dollar has been U.S. and Western sanctions on Russia due to the latter’s Ukraine special military operation. The short version is that the U.S. government has sanctioned the bejeezus out of innumerable things Russian, meaning people, companies, and even the Russian government.

These sanctions included freezing about $350 billion of Russian state assets in Western banks and other facilities. In essence, Russia retains ownership but can’t move its own money around. In recent months, there has been talk in political circles of actually seizing the Russian funds and forfeiting them, perhaps to give to Ukraine or some other end state.

Whatever happens in all of this, the idea that the U.S. government might seize dollar-denominated assets of another sovereign state — definitely Russia, a superpower nation with over 6,000 nuclear weapons in its arsenals — is shocking to other governments and institutions across the world. If you read up on it, you’ll see words like “brigandage,” “piracy,” “banditry,” and more, all applied to the U.S. government.

In essence, Washington's signal to people, institutions, and governments across the globe is that the U.S. is a lawless state run by thieves and pirates. Thus, it’s best to de-dollarize as much as possible. One way to do that is to take dollars and buy gold.

So, What's a Person to Do?

It’s all pretty depressing, yes? All that debt, all that interest. Political signals from people in Washington that all but tell the world to ditch dollars and buy gold. What should you do?

Well, you should buy gold, too, and silver, other minerals and metals, energy, and more. Own real things that hold value over time, in whatever denomination.

You’ve seen the news and numbers, right? The gold price recently increased to over $2,400 per ounce, although there was a pullback in the following days. Silver went over the $29 per ounce level, another long-time high, again with a pullback.

If you want to own physical gold and silver or add to an existing stash, it’s not too late. Right now, your emphasis ought to be on bullion versus any sort of old coins or other numismatic items. Just go for the metal, not the story of what’s engraved on the faces.

Along these lines, we at Paradigm Press work with the Hard Assets Alliance, a company that’s independent of us but with which we also have a financial relationship. If not Hard Assets, many other companies will sell you basic gold and silver. You’ll find them all over the internet. Just be careful how much they mark things up over the spot price.

As for mining plays, it’s fair to say that the interest in gold and silver has not (yet) really moved the equity side, although any number of the best companies have shown solid, recent price moves. Here are a few of the best names, which I follow but are not official portfolio recommendations here at the Rude:

We’ve often mentioned the biggest gold miners, Barrick (GOLD) and Newmont (NEM). They tend to be Wall Street favorites because of their size and the ease and liquidity of large funds to buy in and out.

Other smaller companies in the top echelons of mining, with great assets and superb technical and management teams, include Alamos Gold (AGI), Kinross Gold (KGC), and IAM Gold (IAG). These companies all have market caps of over a billion dollars and are readily tradable.

Finally, I’ll mention a true up-and-comer that works in Alaska called Contango Ore (CTGO). The company is now mining gold-bearing rock and stockpiling material for Kinross to process. So it’s pre-cash flow, but due to begin gold output later this spring and into summer. Once the money hits the cash register, I expect this one to take off.

Again, the takeaway from this note is that gold is moving, and you should understand why. So position yourself defensively in terms of inflation and an ongoing, evolving decline in dollar purchasing power. As I noted before, you want to come out on the other side of the hurricane with your wealth intact, and precious metals are one way to do just that.

Thank you for subscribing and reading.