Donald Trump thinks a return of the gold standard would be ‘wonderful’

The gold standard was abandoned in the U.S. more than 45 years ago
By , Coin World
Published : 02/01/17
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In the new age of currency, gold has become an afterthought.

So nonexistent is gold as a traditional currency that some of our younger readers may not even realize that gold underpinned U.S. and world currencies throughout much of the 1800s and 1900s. 

The gold standard was a system under which currency values were tied directly to gold, allowing gold to be exchanged between nations that used different forms of currency. This encouraged trade, and was a trustworthy option for foreign diplomats. 

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First adopted by Great Britain in 1821, the gold standard enabled governments to issue paper money that was backed by and exchangeable for gold. The amount of money circulating in a country depended upon the amount of gold it had.

Precious Metals Basics: The rise and fall of the gold standard

Sean Williams of The Motley Fool, a website devoted to investing news and opinions, posed the following question last week: 

Would President Trump really put America back on the gold standard?

The question was asked based on the fact that Trump told GQ last year that bringing the back the gold standard would be tough, but “wonderful.”

Impact on possible return

Williams says most economists don’t think that a return to the gold standard, which was abandoned by the U.S. in 1971, would be a positive fiscal move for the United States, as it was the move away from the standard in 1933 that played a large role in getting America out of the Great Depression. 

Various issues could arise from a return to the gold standard, Williams explains. The value of gold can swing tremendously, which could have drastic impacts on the value of the U.S. dollar. We can forecast gold’s market all we want, but as Williams tells us, things can change quickly. 

“For example, between 2011 and early 2016, the price of gold on a per-ounce basis fell by 45%,” Williams writes. “Also, the gold market tends to stay in bull and bear markets for an extended period of time (a decade or longer), meaning recessions would be particularly hard for the U.S. economy to overcome if gold's per ounce price was also low.”

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The market as a whole is at an interesting place, as the new U.S. president offers reasons to think the value of gold may increase. His lack of polictal experience could mean a looming trade war with other nations, Williams writes, and the success or failure of his proposed tax reforms could have major implicatiosn for the price of tangible assets.

He loves gold 

Trump’s enthusiasm for gold stretches back into the 1970s. 

Williams writes that Trump bought lots of gold when the U.S. legalized private ownership of the metal in 1975.

“Selling for about $185 an ounce at the time, Trump noted that he sold his stake between $780 an ounce and $790 an ounce, calling the money-making investment ‘easier than the construction business.’”

His full quote to GQ last year on a return to the gold standard was, “Bringing back the gold standard would be very hard to do, but boy would it be wonderful. We’d have a standard on which to base our money.”

Don’t expect the gold standard to make a dramatic return, but with Trump in office, we’ve all learned to never say never. 

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Older Comments (1)
It should also be noted that the price of gold was (artificially) fixed by government fiat, so the dollar wasn't subject to the vagaries of the free market. It's ironic that those who want a return to the gold standard are essentially requesting a massive government intervention to manage prices instead of allowing the market to do so.