How We Get to Gold at $9,100 Per Ounce

You may have heard that Donald Trump and his Head of DOGE, Elon Musk, plan to visit Fort Knox and audit America’s gold reserves.

Here’s a question… What happens if Prez DJT pops into Fort Knox in the next few weeks, sees that America does in fact own all the gold it purports to own, and then decides, “You know what? With all this gold, I’m gonna whup out an executive order putting the US dollar back on the gold standard! Someone get me a Sharpie!”

Now, to be fully transparent, that is not a question I dreamed up on my own. It comes by way of a Field Notes reader, TCP. And it’s a darn good question at that.

So let’s turn on El Jefe’s Think-o-lator and do some think-o-lating on what such an event would mean.

For much of US history, until 1971, the value of the dollar was tied in some form to the value of gold. Could DJT take us back to those days?

First off, I have to say that I don’t think Trump would actually do that.

I mean, he very well could, of course. This is The Donald, after all, and when others think he’s going to zig, he… doesn’t zag, he zips, or twirls, or twists, or runs, or dodges, or parries. Or starts dancing to YMCA or maybe Tchaikovsky’s 1812 Overture (there’s a Russian patriotism joke in there somewhere).

Meaning, no one ever has any real notion of what Trump will, could, or might do.

It’s a crap shoot—just with 17 dice instead of two.

And all are loaded.

But let’s assume for the sake of TCP’s question that Trump does decide to peg the dollar to gold once more. What would ensue…?

More than a wee bit of chaos domestically and globally. And I will tell all of you now that if TCP’s “what if” comes to pass, you absolutely, positively will want to own gold… the day before. Because the day of that announcement—whoa, Nelly! Gold will fly to levels no one can imagine.

Let’s do some math to give us an idea of where gold prices might land.

Now this is all back-of-the-envelope spit-balling.

We have no way to know what “pegging the dollar to gold” would look like.

Would the 8,133 tons of gold that Uncle Sam reportedly owns, cover every US dollar in existence, so that each greenback (goldback?) is worth $1 in gold… or is each dollar worth some fractional amount of gold?

Do America’s reserves cover some or all of Uncle Sam’s debt? How do you account for fractional banking, given that most dollars in the banking system don’t actually exist except as a digital book entry somewhere?

We won’t try to answer those questions, primarily because I have no idea how to take a bite out of those.

So we will try to be at least as smart as a fifth grader and assume that every supposed dollar in existence would need to represent $1 worth of gold.

The Federal Reserve, as of this past January, claims that roughly $2.37 trillion dollars exist in the world—though the Fed says that’s also just a guess since it really has no clue. But we will use that number.

Divide $2.37 trillion smackers across 260.3 million ounces of gold Uncle Sam supposedly owns, and you get a gold price of about $9,100 per ounce.

But that’s a gold price in a vacuum—meaning it assumes that Trump’s proclamation is a tree that falls in the forest and no one is around to hear it. But of course the entire world would hear that proclamation—and panic would ensue!

Fiat currencies around the world—all backed by bupkis—would collapse almost instantaneously as money fled every currency and rushed into the dollar, or into gold. That kind of demand would push gold well above $10,000 and probably toward $15,000 per ounce.

Gold mining stocks would soar too.

Anyone who is shorting gold prices, or any ETF that has loaned out their gold… would collapse into a heap of vapor.

US stocks would probably surge, as global institutional investors all over the world rushed to own any US dollar-denominated asset, particularly those that pay dividends, since those dividends—paid in gold-backed dollars—would effectively be paying in gold.

But asset prices globally would collapse.

Companies would collapse, especially those that owe debts. They would not be earning enough to service those debts. And woe be to nations and companies that owe US debt but have to convert local currencies into dollars to repay the loans. They’d have no way to raise nearly enough money to cover their debt payments.

Countries would simply collapse, or send currency printing presses into a hyperdrive that would make Weimar Germany inflation seem positively unenthusiastic.

Jobs would collapse. People would lose homes. Retirement savings would be worth fractions of what they were worth a day before.

And then the bad news slams America…

No one overseas can afford American products.

US manufacturing collapses, particularly those companies reliant on exports.

American farmers collapse into bankruptcy, since so many of them rely on sending soy and corn and beef and pork to overseas buyers… who now can no longer afford US ag products.

Jobs in America collapse.

Corporate earnings collapse.

Wall Street collapses.

The energy industry collapses because demand dries up almost as quickly as it did during COVID.

I could keep going, but at this point even I’m depressed about this possibility.

Thankfully, I don’t think this ever comes to pass. The global financial system is simply no longer built for a gold backing, and trying to re-engineer that past is like trying to axe the 21st-century internet and return to a world of 1950s-style switchboard operators.

Of course, the more interesting question is this: What happens if Trump returns from Fort Knox to announce, “The gold is not there!”

That’s a whole different panic for a whole different dispatch…

Or maybe there’s a different scenario: The gold is there, and the US decides to revalue the gold from it’s current carrying value of $45 per ounce to some number north of $1,000. That’s a much happier story, I think. So maybe I’ll share that one tomorrow.

Either way, I guess the takeaway today is this: Own gold.

And just hope this dispatch was nothing more than an exercise in wasting 1,000 words.