Federal Reserve Chairman Jerome Powell keeps expecting President Donald Trump’s tariffs to generate more inflation, but Trump’s higher tariffs in his first term did not cause a rise in inflation and neither are the current tariffs. Instead, Trump’s seeking trade equity with other countries doing business in the U.S. has been lifting the Consumer Price Index (CPI) much more than the Fed’s 2% target rate.
Tuesday morning’s release of the July CPI data showed price increases of just 0.2% in July and 2.7% in the past 12 months. This raises the odds the Fed will likely cut rates in its mid-September meeting.
With gold up 28% so far this year – despite lower inflation – we keep stressing that gold is far more than an “inflation hedge” these days. Gold certainly beats inflation, since the Consumer Price Index (CPI) is up almost 8-fold since President Richard Nixon closed the gold window in 1971. During that time over the past 54 years, gold has gained 96-fold, 12 times the rate of inflation during the same period. Stocks are up 51- to 67-fold since 1971, but gold bullion is up 96-fold.
Gold Reached 100-fold Gains Last Friday, as It Briefly Topped $3,500
Gold is far more of a “crisis hedge” and “stock hedge” since 1971, eclipsing CPI inflation by 12-fold and for one glorious hour last week, gold even gained 100-fold from its 1971 price, due to Swiss tariff threats:
Gold rose above $3,500 to $3,506.50 early on August 8 following news of potential tariffs on gold bars imported from Switzerland but traders in the yellow metal correctly guessed that President Trump would rescind any gold tariff threats. That resulted in gold closing at $3,445 the same afternoon and dropping below $3,400 on Monday.
Switzerland doesn’t mine gold but it is the epicenter for refining gold into 100-ounce and 1-kilogram (about 32-ounce) bars. Switzerland refines between 50% to 70% of the world’s gold each year, processing over 2,000 metric tons per year. Switzerland is also the world’s largest exporter of gold. In 2023, Switzerland exported $109 billion in gold, accounting for 27% of all Swiss exports.
So, in the context of the Trump team threatening to raise tariffs on Swiss exports to 39%, gold futures soared to over $3,500 on Friday, when the U.S. Customs and Border Patrol released a “ruling” on its website, stating the Trump Administration might place the most widely traded sizes of gold bullion bars under stiff import tariffs.
That is what sent gold soaring, as it would disrupt gold’s global supply chains overnight. But in a quick response, a White House official told Reuters Friday afternoon they were preparing an executive order “clarifying misinformation” about tariffs. On Monday, August 11, President Trump said he would not impose tariffs on gold, so gold settled back down toward $3,400.
Coincidentally, this gold kerfuffle took place just one week prior to the 54th anniversary of President Nixon closing the $35 gold window for foreign governments, which had been exchanging their dollars for gold at $35 and then selling that gold on the open market for $42. This generated a quick 20% profit – not available to Americans, of course, since holding gold bullion products was still illegal in America in 1971.
A 2023 book called “Three Days in Camp David” covered how serious this move was. It began on a Friday the 13th, when President Nixon informed 15 key officials on his team to pack an overnight bag and join him over the weekend – destination undisclosed – without telling anyone what they were up to.
Those 15 officials were ferried on two huge helicopters from the White House to Camp David, some 65 miles north. Top officials included Federal Reserve Chairman Arthur Burns, Treasury Secretary John Connally and Undersecretary for International Monetary Affairs Paul Volcker, along with Nixon political aides John Ehrlichman and H.R. Haldeman.
Then, on Sunday night, August 15, 1971, President Nixon pre-empted the most popular TV show in America, Bonanza, to tell us all, in a special TV address. He not only closed the gold window but had issued wage and price controls for 90 days, plus a 10% surtax on imports. The American public and press loved these moves, as the Dow Jones index enjoyed its largest one-day point gain in history, to that date, and rose over 5% in the first two days.
Despite some outcries from the “hard money” community back then, a poll by Albert E. Sindlinger the next day revealed 75% of Americans favored the president’s proposals, while most of those who dissented did so on the ground that Mr. Nixon’s actions should have come sooner. Sindlinger even said that, “In all the years I’ve been doing this business – more than 15 – I’ve never seen anything this unanimous, unless maybe it was Pearl Harbor.” But we knew the likely outcome – high inflation, a weak dollar and soaring gold prices. Sure enough, inflation more than doubled in the next decade, and gold rose 24-fold to $850.
Debunking the Latest Fears – like the China Gold Find – or “No Gold in Fort Knox”
We get a lot of mail here and we pay close attention to your concerns. In general, I tend to downgrade most of these rumors as so much “clickbait,” often filled with incomplete or inaccurate data. I prefer to follow the gold price reaction, which reflects the realities that surround us more than most rumors.
One item, which concerned some investors who wrote to me, has to do with a massive new find of gold in China. It seems to be a veritable “gold bonanza,” the type that Spanish explorers expected to find around every corner in North America, while finding no such “cities of gold” rewarded their searches.
In this case, a massive new gold deposit was discovered last December in Hunan province, China. Initial news reports said that this new gold cache could be worth around $83 billion, making it one of the most significant gold discoveries of all time. And the ore was incredibly rich, at about 138 grams per ton.
It's ironic that gold’s rise above $3,500 happened last Friday, August 8 (8-8), since the number ‘8’ is considered the luckiest number in China and the Mandarin word for 8 sounds like the word for “wealth, or “becoming rich in a short time.” This ties in with China’s accumulation of gold as a major asset in recent years, eclipsing China’s morbid real estate market and underperforming Chinese stock markets.
We all know that China tends to exaggerate some of its economic statistics and projected growth but we will take their word for this big new find. Two caveats: This new find is located more than a mile underground, at 6,600 to 10,000 feet below the surface, so it should take years to fully develop the deposit.
Also, once China mines this deposit, they are likely to keep all the gold within China – in the central bank or on exchange-traded gold funds. This won’t depress the global gold price by rapidly increased supplies, especially over the next few years.
The proof is in the pudding. This new find emerged in December 2024 and gold is up 30% since then.
Another concern we keep hearing about is that the gold stored in Fort Knox may not be there. I know a prize-winning journalist who has toured Fort Knox and she has the gold knowledge and experience with counterfeiting techniques to tell fake gold from the real thing. She assures me that when she toured the facility, “a lot of gold is there.”
Beyond that, investors should realize that almost half of America’s central bank gold is held beneath the Federal Reserve Bank in New York and that gold hoard has been filmed quite often in recent decades.
The gold in Fort Knox is mostly comprised of 90% or .9167 (22 karat) gold, which came from the melting of our gold coinage after FDR’s attempted recall of all privately held gold coins in 1933. Fort Knox gold is primarily composed of 400-ounce (about 27-pound) “Good Delivery” bars made from melted gold coins.
I haven’t been inside the Fort Knox storage rooms but I trust an award-winning journalist, who knows a lot about real gold, telling me that there is a lot of gold there. And there is gold under the New York Fed, too.
But we have plenty of genuine, high-quality gold, silver and rare coins for collectors, investors and rare coin buyers at very competitive prices. Call your friendly neighborhood account representative for the latest special offers. Also, ask for a free copy of our new 2025 national award-winning gold guide and other free publications to help you understand just how easy it is to protect your financial future with GOLD!
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Mike Fuljenz, president of Universal Coin and Bullion, taught classes on grading and counterfeit coin detection for over 20 years. He has also assisted the Texas Attorney General with drafting consumer alerts on coins and on counterfeits. He has lectured and conducted training for law enforcement with the Numismatic Crime Information Center. He has been a member of the National Anti-Counterfeiting Task Force, as well as assisting the Federal Trade Commission with their consumer alerts on coins.