Gold: An especially bad prediction

Published by the R Street Institute.

The history of finance and economics is full of utterly wrong predictions. This should, but doesn’t, teach us intellectual humility when it comes to pontificating about the future. Here is a memorable one, worthy of special mention in the all-time worst financial predictions list:

When the U.S. government stops wasting our resources by trying to maintain the price of gold, its price will sink…to $6 an ounce rather than the current $35 an ounce.

–Henry Ruess, chairman of the Joint Economic Committee of the U.S. Congress, 1967*

In the 1960s, pace Chairman Ruess, the U.S. government was not trying to hold up the price of gold, but to hold up the price of its dollar; that is, to hold down the price of gold. In this effort, it admitted complete defeat in 1971 by reneging on its Bretton-Woods commitments.

The price of gold today is $1,291 an ounce. It is equally true to say that the price of the dollar is 1/1,291 of an ounce of gold, as compared to the official price in Ruess’ day of 1/35 of an ounce.

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*Thanks to investor-philosopher David Kotok of Cumberland Advisors for this instructive quotation.