Mark Skousen told investors to sell gold in 1980, here’s why he’s cautious again

The economist who was "excommunicated" from the New Orleans conference for his 1980 call says rising real rates work against metals, a December hike is "a real possibility" and he has moved into royalties and dividend stocks.NEW ORLEANS (Kitco News) - When the New Orleans Investment Conference opened in November 1980, the day after Ronald Reagan won the White House, the room full of gold bugs was skeptical. So was conference founder Jim Blanchard.Mark Skousen wasn't. "No, this is a revolution," the economist remembers telling them. Right after the conference, he mailed out a promotion titled "The Financial Shock of 1981." Inside, it read: "Reaganomics will work. Sell your gold and silver.""It was my very first prediction in my newsletter, but it absolutely bombed," Skousen told Kitco News. "And it bombed because people didn't believe me. The promotions that work are the ones that people believe."The gold crowd didn't forget. "It was not a popular thing at this conference, I can tell you that," he said. "I was excommunicated for a few years."The call held up. Gold had peaked at $850 an ounce on Jan. 21, 1980. It sank to about $250 by 1999 and didn't top $850 again until January 2008. Skousen called it a "20-year bear market in gold and silver." "That's a long time," he said.Forty-six years later, Skousen is back in New Orleans and cautious on metals again. This time, he says, the bigger threat to your money is inflation that never fully goes away.Skousen, a former CIA economist who edited the Forecasts & Strategies newsletter for 45 years, is now macroeconomic strategist at the Oxford Club. He spoke with Kitco News on Oct. 29, a day before gold fell more than $100 and slipped below $4,000 an ounce. Gold hit a record $5,589.38 on Jan. 28."I'm one of the few people at this conference who's rather cautious," he said.'An era of permanent inflation'Skousen hears echoes of the late 1970s. "You do have heightened inflation. It's nothing like the '70s, but you do have heightened inflation, and you do have a situation of a booming economy," he said.The data that morning backed him up. The economy grew at a 3.4% annual rate in the third quarter, the Bureau of Economic Analysis reported. The personal consumption expenditures price index, the Fed's preferred inflation gauge, rose 3.6% in the 12 months through September.Skousen traces the problem to the money supply, which he said "took off 40% during the pandemic." Federal Reserve data show the M2 measure climbed from about $15.4 trillion in February 2020 to a peak near $21.7 trillion in 2022. He also pointed to the war and higher fuel costs. "War is always inflationary," he said.He faults the Fed for swapping price stability for a 2% target, adopted under Ben Bernanke in 2012, then cutting rates before inflation got back there."We have entered an era of permanent inflation, and every investor needs to know that," Skousen said. "You've got to increase your portfolio, I think, by 10% a year just to keep up with taxes and inflation and all the other threats to your wealth." Warsh and the Volcker testThe Fed raised its benchmark rate a quarter point to a range of 3.75% to 4% on Sept. 16, its first increase since 2023. It held on Oct. 28, when two officials voted for another hike.Skousen said Fed Chair Kevin Warsh "wants to be another Paul Volcker. I'm convinced of this." He likes that Warsh watches the money supply, not just interest rates. "I give him high marks," he said.Asked whether the Fed hikes again in December, Skousen said: "Yes, I think that's a real possibility."The bond market may leave Warsh no choice, he said. "If the bond market continues to drop and rates go up in the 10-year, he's gotta raise rates," Skousen said. "Because otherwise he's printing free money for the banks."But he doubts Warsh can go as far as Volcker. "He had to raise interest rates to 21%. I don't see that happening," Skousen said. The prime lending rate hit a record 21.5% in December 1980, according to Federal Reserve data.The difference now is the deficit. The Treasury reported a fiscal 2026 deficit of about $1.99 trillion for the year ended Sept. 30, up $217 billion from a year earlier."$2 trillion and we're at full employment," Skousen said. "This is a potential monetary crisis, so gold could rally on any kind of a monetary crisis."What it means for gold and silverA monetary crisis is the case Skousen makes for gold. Otherwise, he said, rising real rates work against a metal that pays no interest."If interest rates on a net basis, real interest rates, if they're going up higher than inflation, which I think is happening right now, that's not good for gold or silver," he said. The 10-year Treasury yield traded near 4.9% in early November, above the 3.6% inflation rate.Skousen has called $50 a floor for silver. Asked what a break below it would mean, his first answer was personal. "I would be very relieved," he said.He used to hand his students at Chapman University a silver dollar, he said, and stopped once silver topped $100. Silver hit a record $117.69 an ounce on Jan. 26. Prices are finally "more reasonable," Skousen said, "but not enough for my students to get a silver coin." They get a copy of his book, "The Maxims of Wall Street," instead.As for that floor? "Okay, so it could break $50," he said. "I was just talking in general, there's a ratcheting up of silver." He still called silver demand "definitely in a bottoming pattern."What he owns nowSkousen said he recommended Kinross Gold last year. The stock roughly tripled in 2025, according to Macrotrends data, then slid this year. "I'm out," he said.He switched to royalty company Franco-Nevada for its revenue-based model and rising dividend, though he admitted that pick is "kind of breakeven."Asked what lesson from 1981 applies today, Skousen said his old advice doesn't translate. "So sell your gold and silver and buy stocks and bonds is not quite the same. Because stocks and bonds have had this huge run-up," he said."So does that mean we shift to cash? No, I think we shift to dividend-paying stocks." He named Main Street Capital, which pays a monthly dividend plus a quarterly one. And bonds? "I'm staying out of bonds, yeah, completely."Thrift runs in the family. Skousen, a descendant of Benjamin Franklin, said his ancestor "was very anti-debt" but also championed paper money and got the first contract to print it. "So he was the first crony capitalist in America," Skousen said.For retirees afraid of running out of money, his advice is blunt. "Listen, you're going to die a millionaire. Are you going to leave that to all your kids?" he said. "You need to spend your ... kids' inheritance."And the man who told a generation of gold bugs to sell? He still carries some."I have some right here, gold and silver, which I keep on me," Skousen said, "'cause I came from the gold bug era."WATCH: Mark Skousen's full interview from the New Orleans Investment Conference is above. Hear why he says Warsh "wants to be another Paul Volcker," and what he tells his students about silver.Kitco News on-site coverage of the New Orleans Investment Conference is presented by Dakota Gold.

Mark Skousen told investors to sell gold in 1980, here’s why he’s cautious again

Andere Nachrichten des Unternehmens