Steve Forbes, Chairman and Editor-in-Chief of Forbes Media, characterized gold as essential insurance against currency crises, inflation overreaction, and dollar devaluation, as markets experience a dollar resurgence following gold's late January highs near $5,600 per ounce. Forbes attributed the dollar rally to the Trump Administration stopping rhetoric about dollar devaluation and Fed chair Kevin Warsh's focus on stabilizing currency rather than reining in economic activity. Forbes cautioned that despite gold's decline from January peaks, the metal remains up more than 20% from last summer, with ongoing risks from the Iran war and potential international monetary crises involving the Japanese yen or British pound.
Trump Administration Policy Shift Drives Dollar Rally
Forbes stated that the dollar rally represents a change in currency value rather than a decline in gold's intrinsic worth. "Better than any item on earth, gold keeps its real value and has done so for thousands of years," he wrote. "Gold is to measuring the worth of a currency what the North Star is to measuring direction. When the price of the yellow metal changes, it's the value of currency that has changed. Gold is the constant."
Forbes identified the Trump Administration's policy shift as the primary driver. "The biggest factor is that since gold surged past $5,000 in January, the Trump Administration has stopped muttering about the need to devalue the dollar to reduce our trade deficit," he said. "Cheapening a currency is the very definition of monetary inflation. It's always a formula for damaging an economy."
He added that Kevin Warsh's approach as Fed chair strengthened the dollar by focusing on currency stabilization rather than economic activity reduction.
Treasury Yields Rise Past 4% Amid Supply Pressures
Forbes noted that the two-year Treasury yield jumped past 4% despite dollar strength. "The answer is supply and demand," he said. "The government is issuing boatloads of Treasurys to pay for our huge budget deficit and to refinance trillions of dollars in existing debt that is coming due. When the dollar was fixed to gold, the level of interest rates fluctuated, depending on market conditions."
Gold Price History Shows 20% Gain Since Last Summer
Forbes provided historical price context to demonstrate gold's long-term trajectory. "Gold was then around $1,800 an ounce" in 2022, he noted. "Two years ago, it had moved up to $2,300; a year ago, $3,300. Today, the price of an ounce is still up more than 20% from last summer. What may well be happening here is the stock market equivalent of a bear market rally."
He cautioned against premature celebration over the dollar's recovery, stating the currency has lost significant value since 2022.
Forbes Warns of Iran War Energy Price Impact
Forbes stated that the Iran war retains potential to send energy prices higher. "The Federal Reserve's reactionaries are likely to then put pressure on Warsh to hike interest rates," he said. "He will resist, but the uncertainty will unsettle the debt markets."
He identified potential for international monetary crisis involving the Japanese yen or British pound. "Japan's national debt is proportionately twice our own. Its financial institutions are loaded with government debt that was issued with virtually no rate of interest, sharply reducing the value of that paper today," he noted. "If the UK's new prime minister acts half as radically as he has sounded, that will pound the country's currency and curtail the government's ability to sell bonds to pay its deficits."
Forbes referenced the mid-1980s dollar devaluation that contributed to the 1987 stock market crash as historical precedent.
Central Banks Purchase Gold at Record Levels
Forbes characterized gold as insurance rather than investment. "Gold is not an investment; it is insurance for financial troubles," he said. "Keep the insurance."
In May 2024, Forbes wrote that the world is progressing towards a new gold standard. "It's hard to believe, but the world is beginning to lurch toward a gold-based monetary system," he wrote. "This, despite the fact that the historical gold standard is held in almost universal contempt by economists and financial officials."
Forbes noted that central banks purchased gold at record levels in recent years. "Buyers include China, India, Russia and a number of other nations such as Poland," he stated. "These countries are reacting to growing doubts about the long-term value of the dollar, which in turn is a symptom of the perceived decline of the United States."
He stated that the U.S. maintained a gold-based system for 180 years until the early 1970s without experiencing inflation during that period. Forbes said that since abandoning the gold standard, average U.S. growth rates declined by around 33%. "Median household income today would be at least $40,000 higher if our traditional pattern of growth for those 180 years had been maintained," he said.
FAQ
Why did Steve Forbes say gold prices declined from their late January highs?
Forbes stated that the decline represents a dollar rally rather than a change in gold's intrinsic value. He attributed the dollar strength to the Trump Administration stopping devaluation rhetoric and Fed chair Kevin Warsh's currency stabilization approach.
What risks did Forbes identify for future dollar stability?
Forbes warned that the Iran war could send energy prices higher, potentially pressuring the Fed to raise rates. He identified potential international monetary crises involving the Japanese yen or British pound, noting Japan's national debt is proportionately twice that of the U.S. and UK policy uncertainty could impact the pound.
What evidence did Forbes cite for gold's role as insurance?
Forbes noted gold remains up more than 20% from last summer despite recent declines, and central banks including China, India, Russia, and Poland purchased gold at record levels in recent years, reacting to doubts about long-term dollar value.
