Market Insights

3 Reasons Big Government Resents Gold 

Gold Alliance disclaimer
Big government ditched the gold standard. Why do you think they resent gold?

Historically, the Gold Standard created a strong bond between gold and the dollar, but once those ties were cut half a century ago, our government was set free to spend as it wants (not us, mind you), and the dollar turned into an unbacked currency (a “fiat” currency).  

As a result, the US government no longer had to increase its gold reserves when it wanted to add money to the money supply — monetary policy execution became a whole lot easier, uninhibited by reality and unlimited in scope. 


But governments know about gold’s ability to show that the king has no clothes on, and they don’t like it. Here are 3 reasons why. 

1. The government can’t print gold at will 

As has been on full display for the past 20 years, our government is consistently creating new money from thin air. Trillions of dollars more.  

Initially, there were reasons to add money to our money supply, like the dot-com bubble bursting and then the Great Financial Crisis. But it appears that, at one point, reasons became unimportant: In order to prevent us from experiencing downturns and healthy market cycles, which clear out bad decision makers, our government just kept the money printers going even after the economy and the markets recovered.  

And when the pandemic hit, the money printing picked up even more speed to try and cover stimulus packages and other expenses that came with it. 

Gold puts a spotlight on the declining purchasing power of the dollar 

Physical gold, on the other hand, cannot be printed, which makes it difficult to control. Because the government cannot print gold, the amount of gold in existence may eventually point to the declining purchasing power of the inflated dollar by rising in price.  

Over the past two decades, the price of gold has skyrocketed, which is a constant reminder of the debasement of the dollar. Gold points a finger at the success or failure of the fiat currency, and governments would like nothing more than to cut off that finger.  

2. The government wants to have a monopoly on currency 

Having a monopoly on currency strengthens the government and removes power from the individual. In 1933, the US government recalled gold in exchange for its equal value in paper money. Two years later, the government raised the price of gold and was thus able to print more money based on the increased value of their gold reserves. As a side note, all the citizens that brought in their gold lost 80% once the devaluation occurred. 

Additionally, not letting Americans use gold as their currency gave the US government a monopoly on what is accepted as US currency. With gold no longer being a viable option to use in trade, the dollar was the only currency allowed. Governments don’t want to go back to being subject to anything, including gold’s stability.   

3. Gold empowers people and prevents government oversight 

In the late 1940s, congressman Howard Buffett (father of Warren Buffett) made this point best

“[W]hen you recall that one of the first moves by Lenin, Mussolini and Hitler was to outlaw individual ownership of gold, you begin to sense that there may be some connection between money, redeemable in gold, and the rare prize known as human liberty […]. The subject of an all-powerful government is a serf by the mere fact that his money can be called in and depreciated at the whim of his rulers. … Under such conditions the individual citizen is deprived of freedom of movement. He is prevented from laying away purchasing power for the future. He becomes dependent upon the goodwill of the politicians for his daily bread. Unless he lives on land that will sustain him, freedom for him does not exist.” 

The takeaway from this history lesson is painfully clear: Gold equals freedom. Without gold, you are to some degree living on the whims of the politicians.  

Our government can in many ways manipulate or control the value of the dollar, but the price of gold is determined by the market. That empowers gold holders: Not only are they protected from the devaluation of a currency, but they also possess an asset that is highly liquid and has transferable value in essentially every country in the world. Governments don’t like that freedom. 

Gold has almost no digital footprint 

Add to this the monetary oversight by the government. One of the reasons that digital currency has exploded is because it has been promoted as being out of reach of politicians. However, governments are rushing to introduce regulations to bring it under their control. Both 2021 and 2022 have seen many regulations proposed, and many crypto holders saw their so-called “private” assets seized.  

Even your cash, due to the prevalence of digital commerce, can be followed. In fact, spying on your purchases and selling that information to third parties is a billion-dollar industry.  

Gold, however, is outside of this sphere of oversight. Because gold is physical, it has almost no digital footprint. Additionally, there are few reporting requirements for how much gold you purchase, sell, or own. If you wanted to sell some of your gold to your neighbor, the government wouldn’t have any idea, and they couldn’t do anything about it. Do you think they like that? 

The government needs gold 

Why do governments tolerate gold being around, and why don’t they ban it? It’s most likely because they also need it. Central banks use gold as a key reserve asset that gives them the independence, freedom, and control they need outside of relying on another foreign power’s currency. You see, central banks may tell us that gold is a commodity, but they use it as a pure form of money on their books. And I say, what’s good for them should be good for you.