Today Is a Big Day in Gold’s History

At Navellier Market Mail, Gary Alexander sums up why August 16 has been such an important day in the history of gold.

Today marks a red-letter day in the history of gold in America. On August 16, 1896, George Carmack discovered one of the largest gold strikes in history on Rabbit Creek in Canada’s Yukon Territory, just across the border from Alaska. A century ago this week (August 14, 1916), Denmark approved the sale of the Virgin Islands to America for $25 million in gold – another land-grab bargain made possible by taking advantage of cash-starved European nations during a World War. And on August 16, 1925, Charlie Chaplin’s silent film classic, The Gold Rush, inspired by the 1849 gold rush, opened to U.S. audiences.

The most dramatic golden event in U.S. history came 45 years ago on Monday, August 16, 1971, when the Dow Jones Industrial Average rose 33 points (+3.8%) the morning after President Richard M. Nixon appeared on national TV to “close the gold window” (refusing to honor the $35 per ounce price of gold), effectively devaluing the dollar. Nixon also imposed wage and price controls (in response to a 3% CPI inflation rate!), and a 10% surcharge on all imports. You would think this package of central controls of the economy in a free nation would have caused stocks to fall, but Nixon’s moves were very popular at the time.

A poll of 220 households by Albert E. Sindlinger & Co. on August 16 revealed that 75% of Americans favored the President’s proposals, while “most of those who dissented did so on the ground that Mr. Nixon’s actions should have come sooner.” Mr. Sindlinger said, “In all the years I’ve been doing this business – more than 15 – I’ve never seen anything this unanimous, unless maybe it was Pearl Harbor.”

I was on deadline at a major magazine writing about Nixon’s 1971 Dollar Crisis. I was shocked but not surprised by the announcement, since I had read Harry Browne’s 1970 book on the Coming Devaluation. I came to know at least three other people who were so shocked by Nixon’s move that they launched new businesses. All three of them intersected my life over the following decades: (1) New Orleans school teacher James U. Blanchard III formed The National Committee to Legalize Gold. Also: (2) David Nolan saw Nixon’s speech in his Colorado living room and decided to form the Libertarian Party; and (3) Robert D. Kephart, publisher of Human Events decided to publish an “Inflation Survival Letter” (which morphed into “Personal Finance”) to help investors survive the inflation that was certain to follow price controls. (Full disclosure: I eventually edited publications for Bob Kephart and Jim Blanchard during the 1980s).

It’s still hard to believe that it was illegal for Americans to own most forms of gold from 1933 to 1974. On April 5, 1933, FDR’s Executive Order 6102 demanded we surrender our gold for $20.67 per ounce. Those who stuffed this inert metal in a mattress or vault risked 5-10 years in prison and/or a $10,000 fine!

This gold story ends with a Pyrrhic victory for gold investors. On August 14, 1974, Congress authorized U.S. citizens to own gold for the first time in 41 years, as of December 31. This was a Pyrrhic victory since Americans missed all the gains from $20 (in 1933) to $195 (the gold price on December 30, 1974). Alas, gold then proceeded to fall sharply after it was legal to own, falling to $102.20 on August 30, 1976.

Here’s how gold performed in the early 1970s.

Posted by on August 16th, 2016 at 9:04 am


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