1971: The Day the Dollar Came Off Gold
On August 15, 1971, President Nixon ended the U.S. dollar’s convertibility into gold. Until then, the government was committed to exchanging dollars for gold at $35 an ounce. After that day, the dollar was backed only by confidence in Washington.
Gold did not become 120 times more useful. The dollar became worth far less. That is the simplest way to understand what inflation has done to savers over the last five decades.
What Inflation Does to Your Savings
According to Bureau of Labor Statistics CPI data, it takes about $1.87 today to buy what $1.00 bought in 2000. Inflation peaked at 9.1% in June 2022, the highest in about 40 years. Groceries, insurance, housing and healthcare have all climbed faster than many retirees’ income.
$40 Trillion in Debt, and Counting
When a government spends far more than it collects, it has two choices: raise taxes sharply, or borrow and let inflation shrink the real value of what it owes. History shows which path politicians usually choose. Either way, savers holding only dollar-based assets carry the cost.
Why Gold Has Held Its Value
- It cannot be printed. New gold must be found and mined, so supply grows slowly.
- It is no one’s liability. Gold does not depend on a government, company or bank keeping its promises.
- It has worked for centuries. Gold has been a store of value through wars, currency collapses and runaway inflation for thousands of years.
- It is priced in failing currencies. When a currency loses value, it takes more of it to buy the same ounce of gold.
Gold is not a perfect short-term inflation hedge. It can fall even in years when prices rise. But over the long run, it has preserved purchasing power in a way paper money has not.
How to Protect Your Retirement From Inflation
You do not have to cash out your retirement account to own gold. A Gold IRA lets you roll part of an existing 401(k), 403(b), TSP or IRA into physical gold and silver, tax-free and penalty-free when done as a direct rollover, and keep your IRA tax benefits.
