Gold performs, gold protects

President Trump's tariffs were once again dominating the news cycle last month in the wake of the latest court decision to try and stop his election promises. This time it is by the previously unheard of, U.S. Court of International Trade. Top economic advisor, Kevin Hassett, expressed the day after that the Administration was confident this ruling is incorrect and will be overturned. Later that same day, the U.S. Court of Appeals for the Federal Circuit gave a temporary stay until at least June 9th.

Source:

Trading Economics (Gold).

Gold reacted by increasing 2% in price, from the original court's verdict on May 28 th to Hassett's statement the next day on the 29 th . Over the past two months, the price of gold has looked somewhat schizophrenic at times, particularly in relation to tariffs. It dropped more than 6% in the week after "Liberation Day", then climbed back almost 17% during the first two weeks of the "Art of the Deal" pause. It has been a roller coaster ride since, but within a somewhat flatter trend.

Unless you are a professional, or even amateur, trader, it is best to look at gold investment with a perspective of years or decades, rather than just days, weeks or even months. In the shorter term, gold price is driven by what economist John Maynard Keynes called "animal spirits." In the longer term, it is driven by "monetary spirits." And not just as protection, but also for performance. The new 2025 Presidential Gold Guide highlights both these in Chapters 5 and 4, respectively.

Economist and investor Mark Skousen wisely noted that: "Since we left the gold standard in 1971, both gold and silver have become superior inflation hedges." And the numbers back that up. Gold has more than countered the results of inflation, as somewhat measured by CPI (Consumer Price Index), and the drivers of inflation, as considerably measured by M3 (money and credit supply).

The Gold Protects graph below compares gold price, CPI and M3 in terms of cumulative growth of each from 1971 to 2025, that is throughout the whole era of gold as an investment. During this era, gold grew by 541%, CPI by 214% and M3 by 384%. Annual average growth for gold was 10%, CPI at 4% and M3 at 7%. Maximums were 92%, 14% and 29% respectively. CPI only failed to grow twice, i.e. 0% in 2009 and 2015. M3 decreased twice, by -4% in 2023 and -6% in 2024.

Sources:

FRED (CPI)(M3); World Bank (Gold).

The highly respected In Gold We Trust report for 2025 stated: "When dealing with the specific level of gold allocation, it is advisable to differentiate between safe-haven gold and performance gold. The Big Long strategy emphasizes the potential of performance gold in the coming years[.]" They recommended 'rule-of-thumb' gold investment of 15% safe haven and 10% performance.

The Gold Performs graph below compares gold price, S&P (Standard and Poor&500 Index) and GDP (nominal Gross Domestic Product) in terms of cumulative growth of each from 1971 to 2025. Gold grew by 541%, S&P by 484% and GDP by 339%. Annual average growth for gold was 10%, S&P at 9% and GDP at 6%. Maximums were 92%, 45% and 14% respectively. Gold did have a higher standard deviation of 27%, compared to 17% for S&P and 3% for GDP. But more risk means more return, and vice versa.

Sources:

FRED (GDP); Shiller Data (S&P); World Bank (Gold).

Gold protects as a hedge or safe-haven, not just from inflation, but from the 'flipside' of that same 'coin' of the boom-bust cycle. Both are driven, in the longer term, not by "animal spirits," but by "monetary spirits." Inflation is when money inflation has a widespread impact as price inflation. A bubble is when money increases have a more concentrated impact such as in certain asset values. The bubble eventually bursts when "monetary spirits" are finally reined in by monetary realities.

I say "monetary spirits" because of the role of fiat money, as indicated by say M3. When money supply outstrips money demand in a localized way, then that is a bubble, and when in a general way, that is inflation. The former shows up in certain asset, wholesale and/or producer prices, whilst the latter shows up in CPI. Asset prices include the S&P. But nominal GDP is also 'ginned up' as it is ultimately a price times quantity measure as well. Price is expressed in money terms.

Gold can have ups-and-downs, as standard deviation indicates, due to the "animal spirits" of fear and uncertainty, but these tend to be daily, weekly or monthly. Yet, gold both protects and performs, due to the "monetary spirits" of inflation and boom bust, which tend to be yearly or decennially. Thus, gold performs when the S&P does not, like in the aftermaths of the 2001–02 Dot Com Collapse, 2008–09 Global Financial Crisis (GFC) and 2020–21 Covid-19 Lockdowns.

Therefore, when it comes to gold, "follow the money," of central bank 'money printing' and fractional reserve bank 'fountain pen money', for both superior inflation protection and boom-bust performance.

And besides, Mark Skousen rightly 'begged the question' as follows: "Gold and Silver have always had value, never gone to zero. Can you say the same for stocks and bonds?"