Throughout the late 70s, gold went on a bull run that was even more dramatic than the current bull market — only it ended suddenly and abruptly in 1980 — destroying the investments and life savings of those who believed “this time was different” and that gold was the only investment worth investing in. This leads to some questions.
So, what happened? And, perhaps more importantly, why does this matter to us? Let’s look to history and answer these questions.
Gold Is About Inflation Fears – Not Inflation.
I’ve repeatedly said that gold is more about the fear of inflation than inflation itself. As explained in the article:
“If you’re a market timer, then investing in gold is all about predicting the future emotions and feelings of the system. If this was 2008, and you believed things were not going to be fixed by short-term bailouts, then you should have bought plenty of more gold.”
This goes both ways. If inflation is getting rough, and the Fed institutes a policy to “fight” inflation, then the price of gold will instantly reflect this — assuming, of course, we’re not already in a hyperinflation-too-late-to-stop scenario. Even then, gold will probably still react on some level to the new policy.
What was the price of gold in 1980.
I’ll let my favorite economist and author Richard Maybury tell the tale:
“In 1979, Fed chief Paul Volcker took office as the dollar was headed down the tubes. Volcker decided to save the greenback by tightening monetary policy severely. This droves interest rates beyond 15%. Non-dollar assets crashed, and most were moribund for two decades.”
Richard J. Maybury
Non-dollar assets include assets like gold and silver. That’s why if you look at pretty much any chart, gold and silver essentially died for a few decades right after the Fed decided to push interest rates through the ceiling. I don’t think we’re at risk of this happening soon — but when inflation actually hits, if it’s hard enough, there’s a very, very good chance that’s going to happen.
This is why it pays to understand how money works, how the economy works, and why the Fed is evil. When someone can manipulate an investment market, you’re in, don’t bet the farm on it. Let me say this again — when someone can manipulate your investments, don’t put everything into the investments.
We obviously have to invest somewhere, which is why I’ve explained in my course how to invest in gold so that you profit permanently from temporary bubbles and don’t lose your shirt when the market crashes. The strategy works for cash, gold, bonds, and stocks.
If you want to read that course, as well as a new inflation course I’ve pieced together, then just wait — over the next few days I’m going to email you about a brand-new website I’m launching that will allow you to essentially learn how to retire early, how to stop paying interest on your debt, how to get debt free quickly, and how to build a safe portfolio that makes money during bubbles and recessions alike.