The Financial Times reported last week that the Republican party is set to create a gold commission to examine the benefits of reinstating a gold standard. Drafts of the party platform also call for an audit of the Federal Reserve. The commission is reminiscent of the one setup in the early 1980s by President Ronald Reagan. "Now, three decades later, as we face the task of cleaning up the wreckage of the current Administration's policies, we propose a similar commission to investigate possible ways to set a fixed value for the dollar," the proposal explains.
Although it is highly unlikely that the Republicans will be able to steer the nation back towards the gold standard, the mere mention of doing so has drawn heavy criticism from economists and journalists. However, gold does not care about politics or the usual campaign rhetoric. Its role of sound money in the
In addition to individuals purchasing gold and silver bullion to diversify their
Bill Gross, founder and co-chief investment officer of Pimco, has been vocal about his views on the economy and actions of central banks. In a recently released investment outlook letter, Gross claims "the cult of
In response to the company's inflation outlook, The Pimco Commodity Real Return Strategy Fund, which has roughly $20 billion in assets, increased its gold exposure to 11.5 percent of total assets, compared to 10.5 percent just two months ago. The fund added gold when the price fell towards $1,500 earlier this year, according to Nic Johnson, the fund's co-portfolio manager. In August, it was also made evident that billionaire fund manager John Paulson added heavily to his SPDR Gold Trust position.
While politics has the power to cloud even the most basic beauties in the financial system, it does not currently prevent individuals from applying the gold standard to their own portfolios. Even a small allocation of precious metals can help investors weather the financial storm that is gathering speed around the world.
Eric McWhinnie
Wall St. Cheat Sheet
Disclosure: Long EXK, AG, HL, PHYS