Gold, Bitcoin, and Trump

What a shakeup. An echo of gold and Reagan.

American Gold Eagles, 1 troy ounce

If you haven’t read my 11/5/24 post, “7 Predictions”, you might want to check it now.

“The gold of that land is good…” Genesis 2:12

Investing 301 was scheduled for today, but I’m putting it off a little longer, because I see something strange happening with gold and bitcoin (BTC) since the election. BTC is up because President Trump said he’s favorable to digital currencies. But don’t ever forget that we’re talking high risk here. Yes, BTC could go to the moon, but it’s history is very short compared to gold. 10 years compared to 5000 years. So don’t throw caution to the winds.

“Be sure you know the condition of your flocks, give careful attention to your herds” Proverbs 27:23 This is like saying “stay on top of your investments.”

As for gold, it’s been dropping since the election. So I got to thinking - didn’t this happen when Reagan was elected? Yes. Gold peaked at $603 in 1980, the year Reagan was elected. A recession was also starting, then hesitated, then hit harder from 1981 to 1982. By the summer of 1982 gold had dropped to $333, or 44.8%.

This particular chart (screenshot from macrotrends.net) is gold adjusted for inflation. The gray columns are recessions.

Here’s a bunch of interactive gold charts from macrotrends that are fun to play with. Whether you want to look at gold vs silver, or gold vs the Dow, or the S&P, or a dozen other options. You can move your curser to any point on these graphs and you’ll see the date and price point. Click HERE and have some fun while you get educated.

It didn’t occur to me until now that the reason for gold to peak and drop wasn’t simply the old saying that what goes up must come down; there has to be a trigger. Could the trigger have been the fact that Reagan’s election forecasted a big improvement in the economy and a slowing of inflation? Gold is a ‘safe haven’ when governments look like they’re headed for trouble and when inflation looks like it’s getting out of hand, which is what was happening during the Carter administration. Reagan’s election calmed those fears, so gold could be sold, profits taken, and the money reinvested in the economy.

Could that be what’s happening today with Trump’s election? I think yes. Gold peaked at about $2800/ounce when we didn’t know who was going to win the presidency. When it became clear that Trump was the winner, gold started selling off sharply, and for the same reason - economic fears have been calmed. It’s down to 2573 as I write this at 2:40PM 11/13/24. That’s 8% down when so many other things are going up. So gold profits are being taken and the money put into the economy. Should we ‘buy the dip’?

Here’s the risk for gold bugs. After the 1980 peak, gold didn’t recover for almost 21 years. It got up to the high 400s a couple times in non-adjusted dollars, but hit a low of 261 in Feb 2001.

Could something like that happen again? Of course it could. It’s possible. I’m not predicting, just pointing out the possibility.

On the other hand, I don’t really think the gold price decline will last long this time. I think the public and private debt is so high and government expenditures so out of control and so locked in that even Elon Musk won’t be able to cut enough to give a surplus to start paying off the debt. Trump has said he doesn’t want to cut military spending or social security, and he can’t do much about the interest on the debt, so there’s just not enough in other areas of the budget to cut. In fact, it’s a joke to call it a budget, because whenever they want to spend more, they just raise the ceiling. And what kind of a budget is it if you spend a trillion dollars more than income?

So I think that gold will come to the fore again fairly soon, as the realization dawns that the chickens will have to come home to roost no matter who is president. The Fed can’t lower interest rates much without risking runaway inflation, and at current rates, the interest alone on the national debt is a Trillion Dollars. That’s a Trillion with a capital T. I think many people will once again be looking for a safe haven.

Which brings me to a suggestion if you want to have true peace: Put your hope in God; not the government. Don’t hold too tightly to anything in this world, because it’s all going to be burned up in the end. Even if you lose everything, God loves you and will keep his promises if you trust and obey him.

image from biblestudytools.com