John Butler, author of The Golden Revolution: How to Prepare for the Coming Global Gold Standard and head of treasury at TallyMoney thinks that not enough people are factoring in a possible return to the gold standard. With gold under pressure for what Butler sees as perfectly natural reasons, many investors are disappointed in its performance, particularly in the last three weeks.
“Today, the gold price is too low to allow markets to clear, because assets are over-valued vis-à-vis gold,” Butler said in an interview with Kitco news, According to my calculations, you’re talking about something in the region of $50,000 per ounce being [reasonable] if you go back to a gold-backed international monetary system.”
Gold has suffered from higher inflation being priced in by investors and a hawkish Fed has kept gold struggling. When we leave the current “hawkish moment,” Butler thinks that Powell could reverse rate hikes to gold’s benefit. “I think gold is going to recover all of its losses this year, and indeed reach new highs.”
But inflation isn’t the only part of the story. The U.S. dollar has had surprising strength as investors look for stability amid global volatility. “This is as much or more a U.S. dollar story as it is a gold story,” Butler said, noting that the dollar’s strength is dampening gold. Butler sees the dollar as overvalued, particularly if the BRICS nations (Brazil, Russia, India, China, and South Africa) develop a reserve currency that adheres to the gold standard.
Butler’s book theorizes that the BRICS countries would likely choose “a gold-backed currency of some sort” as “an objective reference currency that can be trusted and accepted by all.”
“The fact is that nobody can print gold, and nobody can create gold,” said Butler. “It’s nice to know that Mother Nature determines how much gold is available… [Gold] facilitates all the good things about international trade while mitigating the potential bad things about monetary manipulation.”
Investors can gain exposure to the yellow metal through the Sprott Physical Gold Trust (PHYS) or the newly launched Sprott ESG Gold ETF (SESG), which sources gold from environmentally friendly mines. An equities play is possible through gold miners such as the Sprott Gold Miners ETF (SGDM) or the Sprott Junior Gold Miners ETF (SGDJ).
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