NEW YORK – JANUARY 9: Gold bullion bars and coins are seen for sale at Manfra, Tordella and Brookes, Inc. January 9, 2003 in New York City. The price of gold has risen by nearly 30 percent over the past year with investors looking for stability as war with Iraq has become more likely. (Photo by Mario Tama/Getty Images)
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To buy gold is to withdraw resources from the wealth and information creating private sector. That’s because consumption is in most instances a confirmation of knowns, of the exchange of resource access (money) for existing wealth.
The above is a friendly attempt to counter to Ken Fisher’s assertion that investors are misreading the gold rally. Whom to believe? Fisher’s extraordinary wealth born of an enormous base of very happy clients tells readers to listen to him over John Tamny, and it similarly tells John Tamny to listen to Ken Fisher over John Tamny. Still, a case will be made that gold is a better equity market tell than Fisher gives it credit for.
Fisher writes that “Since 1974, after the U.S. ended the gold standard’s final restrictions, gold annualized 7.1% gains through September.” He adds that since 1974, U.S. equities have annualized 11.5 percent. Stocks plainly outperform gold, though the view here is that periods of substantial underperformance or decline by gold play a very real role in equity market performance. See the opening paragraph.
Fisher adds that gold isn’t even a great inflation hedge. He points to 2022, when “inflation hit 40-year highs” amid bigger declines for gold than stocks. It’s a great point, but one that supports this column’s lonely case that 2022 was not inflation. No doubt prices for a broad array of consumer goods soared, but as has been argued here all along, the latter was an effect of the breakage of global cooperation among producers (think global lockdowns led by then-President Trump in 2020) such that production efficiencies plummeted. Fewer hands and machines working in symmetrical fashion naturally associates with higher prices, but command and control is decidedly not inflation.
And while it’s true that 1974 marked the time when “the U.S. ended the gold standard’s final restrictions,” markets rarely wait for the end result of policy decisions. Gold’s average price per ounce in 1974 was $158. In 1971, when President Nixon began severing the dollar’s link to gold, it was a shade above $35. As the 1970s closed gold had risen to $513/ounce, and by late January of 1980, it reached a then all-time high of $875. This was inflation, consumer prices merely an effect.
If you accept gold as the most reliable measure of inflation, stocks flatlined during the 1970s (a 1.6% return annualized versus gold up 24x). Conversely, and as gold declined throughout the 1980s and 1990s (inflation arrested), U.S. stocks soared as wealth was removed from the proverbial coffee can and put to work again in pursuit of real wealth creation.
Sadly, the 2000s under President George W. Bush marked a return to dollar devaluation as measured in gold. Gold closed the 2000s at 1,226/ounce versus $266 in 2000, a 360% percent return for the yellow metal versus a 0.95% decline for the S&P 500 from January 31, 2000 to December 31, 2009.
Using gold as the true measure of inflation as truth teller about the dollar, versus a CPI that at best measures the effects of inflation, it can then credibly be said that so-called “Bidenflation” quite simply wasn’t, while the Nixon/Ford/Carter inflations were, as were Bush/Obama. Measured in this way, gold as both an inflation hedge and a signal of economy-sapping currency error becomes more apparent.
Fast forward to 2025, while gold sits at all-time highs to the worry of those (including yours truly) who view it as an unrivaled inflation signal, it’s “only” up 1.6x since 2020 versus much bigger jumps in the 1970s and 2000s. Concerning as the gold rally is given what it signals about a falling dollar, it’s relatively small compared to previous ones. This perhaps explains the strength of stocks amid gold’s rise, all the while raising the “unseen” question about how much bigger equity returns would be (think 1980s and 1990s once again) if President Trump didn’t favor a weak dollar.
The main thing is there’s inflation as measured by the BLS (CPI), and there’s inflation as measured in gold. If the latter is accepted as more reliable, gold’s rise rates investor concern if history is any guide.
Source: https://www.forbes.com/sites/johntamny/2025/11/02/a-different-way-of-looking-at-the-rally-in-the-price-of-gold/
