Gold: Political Uncertainty And The Potential For More U.S. Debt Combine To Push Gold Higher

London (Mar 29)  What American President first comes to mind when thinking of gold as an investment? Some gold bugs with a historical perspective would say President Roosevelt. After all, it was Roosevelt in early 1933 who, in an attempt to fight severe deflation, implemented a series of Acts of Congress and Executive Orders which suspended the U.S. gold standard except for foreign exchange. They also revoked gold as universal legal tender for debts, and banned private ownership of significant amounts of gold coin. These acts included Executive Order 6073, the Emergency Banking Act, Executive Order 6102, Executive Order 6111, the Agricultural Adjustment Act, 1933 Banking Act, House Joint Resolution 192, and later the Gold Reserve Act. Surprisingly, or perhaps not so (depending on your view of the U.S. government), these actions were upheld by the U.S. Supreme Court in the "Gold Clause Cases" in 1935.

Yet it was President Richard Nixon, in 1971, that unilaterally ordered the cancellation of the direct convertibility of the United States dollar into gold. This act was known as the Nixon Shock. Nixon took the drastic step because inflation - caused by rising prices for imported commodities (especially oil) and spending on the Vietnam War - which was not counteracted by cuts in other government expenditures (sound familiar?) - combined with a trade deficit to create a situation in which the dollar was actually worth less (but not worthless...) than the gold used to back it up.

Source: SeekingAlpha