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Do You Have Enough Gold?*
A lot of people look at their gold in a chart like the one below.
Starting at the end of Bretton Woods, in 1971, when we (kinda) ‘broke the peg to gold’ and things started really moving.
Prior to that we were on a ‘peg,’
Meaning the value of our currency was tied to the price of gold and (mostly) didn’t move.
In reality the British and the Americans have been suspending ‘convertibility’ since before the Windsor’s were on the thrown, and almost always in times of conflict.
Note gold’s performance in 1814, 1862 (!), 1913,, 1932, and 1942…years that will all live in history.
Wars are good for gold.
Going back even futher, you realize the return you faced for investing in gold depends a LOT on what currency you ‘priced’ your dollars in.
Are you thinking about the price of gold in dollars, or the price of gold in yen, yuan or euro?
The reason gold spikes in the chart above in 1862 is because of the Civil War.
The value of gold in British Pounds (“GBP”) didn’t change in 1862, the value of the dollar did! It went down a ton relative to both GBP and gold, and so on our chart that looks like gold going up!
Wars are bad for currencies.
In the chart below you can see our stitched together representation of the performance of gold in “dollar” terms, when you use a basket of colonial currencies to represent the dollar during the American Revolution.
The log chart above tells the entire story.
Gold during the American Revolution did orders of magnitude more than gold since 1971.
War is bad for currencies.
War is good for gold.
Ukraine is accusing Russia of using chemical weapons this week.
Tonight they sunk the Russian flag ship in the Black Sea.
War is bad for currencies, and good for gold.
So the question is: if you think we get more war, do you have enough gold?
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