On November 7, 1973, U.S. Senator James Fulbright introduced a brief, one-page bill without even a name. Despite its simplicity, this legislation became one of the most significant in American history. Fulbright’s bill came two years after the 1971 “Nixon Shock,” when President Richard Nixon imposed wage and price controls and ended the U.S. dollar’s convertibility to gold.
Nixon assured the public there would be no negative consequences, yet inflation rose—reaching 3% in 1972, 4.7% in 1973, and a staggering 11.2% by 1974. Meanwhile, gold prices soared from $35 per ounce before Nixon’s policy to over $170 by 1974. However, Americans were unable to benefit from this surge due to a 1933 executive order by President Franklin Roosevelt, which made it illegal for individuals to own gold. Frustrated citizens filed lawsuits, arguing that Roosevelt’s order was unconstitutional.
Roosevelt feared the Supreme Court might overturn his policy, but the Court upheld it by a narrow decision. His order remained in place for 40 years—until Fulbright’s bill was finally passed on August 14, 1974. Following its passage, gold prices skyrocketed, jumping from about $180 in 1975 to an astonishing $850 by January 1980. The declining value of the dollar was only part of the reason for gold’s appeal. The U.S. faced numerous crises in the 1970s and early 1980s, including the Watergate scandal, the chaotic withdrawal from Vietnam in 1975, and the Iran hostage crisis of 1979, in which 52 Americans were held captive for over a year.
At the same time, inflation soared to 13.6%, the economy fell into recession, and energy shortages due to Middle Eastern conflicts drove up fuel prices. Civil unrest and rising crime plagued American cities like New York, Los Angeles, and Chicago. Amidst this turmoil, gold became a safe-haven asset.
There’s an old Danish proverb that suggests history may not repeat itself, but it often rhymes. Today, we’re seeing similar patterns emerge. The Middle East remains unstable, energy shortages (particularly in Europe) persist, the U.S. military endured a humiliating withdrawal from Afghanistan, civil unrest and crime are widespread, and inflation remains a significant issue. Meanwhile, the President’s credibility is in question.
Like in the 1970s, gold is once again seen as a hedge against uncertainty. Despite hovering around $2,000 per ounce, it may still have room to rise. The U.S. national debt now stands at $33.7 trillion—having grown by more than half a trillion dollars in just October alone.
The government exhibits no fiscal discipline and seems oblivious to the consequences of excessive spending and debt accumulation. By 2031, the Congressional Budget Office projects that all federal tax revenue will be consumed by mandatory entitlement programs (like Social Security) and interest payments on the debt. This means everything else, from military spending to basic government operations, will have to be funded through more borrowing.
By 2033, Social Security’s primary trust fund is expected to be depleted, forcing the government to spend an additional $1 trillion per year to maintain benefits—money that will also be borrowed. Eventually, the national debt will become so massive that interest payments alone will exceed total tax revenue. In response, the Federal Reserve may attempt to bail out the government by printing trillions of dollars, which could trigger even higher inflation.
Meanwhile, America’s global standing continues to weaken, increasing the likelihood of future conflicts. It’s also possible that by the end of the decade, the U.S. dollar will lose its status as the world’s dominant reserve currency. While the dollar may not disappear from global trade, it could be reduced to just one of several major currencies—potentially alongside gold.
If central banks around the world begin shifting away from the dollar in favor of gold, we could see a flood of capital entering the gold market, pushing prices even higher. That’s why gold’s current price of $2,000 may only be the beginning of a much larger trend.
I’m not focused on where gold will be next month or even next year—I’m thinking long-term. The economic and geopolitical challenges unfolding today suggest that gold’s rise is far from over.
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