You Can’t Just Print More Gold

“I think there is a strong likelihood we will need another bill.”

That’s according to Treasury Secretary Steven Mnuchin, who supports additional fiscal stimulus to combat the economic impact of the novel coronavirus—within reason.

The secretary’s statement comes after the House passed a record-shattering $3 trillion relief package, though leaders in the Senate have said they will not put it up for a vote. Senate Majority Leader Mitch McConnell has made it clear that the next coronavirus bill “cannot exceed $1 trillion,” according to reporting by Axios.

Even so, the U.S. government’s response is already massive, dwarfing anything that’s come before it.

Across the pond, Britain’s government is likewise spending like crazy. The U.K. budget deficit widened to a record 62.1 billion pounds ($76 billion) in the month of April, equal to the government’s total borrowing in 2019, according to Bloomberg.

Against this backdrop of anything-goes spending, the idea of having a national currency backed by a real asset like gold seems less and less crazy to some. Doing so, it’s believed, would force lawmakers to practice fiscal discipline, reign in inflation and normalize international trade.

Judy Shelton, President Donald Trump’s nominee to the Federal Reserve Board of Governors, has long favored a return to a gold standard, which officially ended in 1971. In an interview with Investment News Network (INN) this week, Shelton said she liked “the idea of a gold-backed currency,” adding that “it could even be done in a cryptocurrency sort of way.”

Although the chances of the U.S. returning to a gold standard are slim to none, I think it’s incredibly important in this time of economic uncertainty to ensure you have a 10 percent weighting in gold and gold mining stocks. I call this the 10 Percent Golden Rule.

The 10 Percent Golden Rule is rational and prudent. The U.S. government and Federal Reserve can’t pump this much money into the financial system and not trigger rapid inflation—and potentially even hyperinflation.

There’s one thing that can’t be printed, and that’s gold. In fact, we may be looking at peak gold supply right now, which should only help the precious metal retain its value as cash deteriorates.