Famed investor Rick Rule wants to talk about the elephant, or actually, the bull in the room. In a wide-ranging interview with Mining.com.au, the private speculator and founder of Rule Investment Media talks about what’s driving gold.
Gold has been on some sort of run over the past 12 months. But there are burning questions about whether it can keep momentum.
As Mining.com.au quotes Rule as saying: “Make no mistake, we’re in a gold bull market.”
Rule lays out his investment thoughts regarding buyers and sellers of the safe-haven asset. He reflects back to 2023 when similar questions were being asked about when the yellow metal was going to move.
“Those people who were buying gold that’s sold that would come back (into the market), should sell. If you own gold for trade, you got your trade. Kiss it, move on,” Rule tells this news service.
“That’s not why I own gold. I own gold because I have a sense of history. I own gold because it has done well when people are concerned about the maintenance of their purchasing power and fiat-denominated instruments.
“And I think that fear is just getting started.”
Golden Rule: Inverse investment
The renowned investor outlines what is happening in America at the moment for context.
Gold itself has not been directly targeted by President Donald Trump, although speculation and shifting risk management strategies are concerning the market. And broad-based tariffs are having a noticeable effect on prices and trading patterns.
There is an intrinsic and traditionally inverse relationship between the strength of the US dollar and gold’s spot price. As the value of one increases, the value of the other decreases.
As per JP Morgan Chase, gold prices often exhibit a negative correlation with the value of the US dollar as it’s denominated in dollars. When the dollar weakens, the precious metal becomes relatively cheaper for holders of other currencies, thereby increasing demand.
Conversely, gold prices tend to weaken as the dollar strengthens. This does not happen in a vacuum though. The Federal Reserve manages the supply of money and the interest rates in the US, so fluctuations in either can profoundly affect the value of the dollar. As such, US monetary policy, among other aspects, can influence the dollar and the price of gold.
As Rule highlights to this news service, the on-balance sheet liabilities of the US Government exceeds US$36 trillion, as of the end of December 2024.
Rising debt, surging prices
The Peter G. Peterson Foundation notes 80% is debt held by the public, representing cash borrowed from domestic and foreign investors. The remaining US$7 trillion (20%) is intra-governmental debt, which simply records transactions between one part of the federal government and another.
Founded by Pete Peterson and led by CEO Michael Peterson, the foundation works with policy experts, elected officials, and the public to build support for solutions to put the US on a sustainable fiscal path. It engages in grant-making, partnerships, and research to educate and involve Americans from a variety of perspectives.
In addition to on-balance sheet liabilities, Rule flags US off-balance sheet liabilities are even worse. The net present value of mechanisms such as Medicare, Medicaid, Social Security, federal government and military pensions is about US$100 trillion.
“In particular, I think that we do what we did in the 1970s, which is to say that we devalue the purchasing power of the US dollar. You honour the nominal value of the obligation”
“This is a lousy number, I mean, this is a really lousy number. I believe that we deal with that debt rather than honestly by defaulting, by defaulting dishonestly,” Rule explains.
“In particular, I think that we do what we did in the 1970s, which is to say that we devalue the purchasing power of the US dollar. You honour the nominal value of the obligation.”
What this means, for example, is if US$4,000 a month is promised in social security – then it will be paid. At the same time the government devalues the dollar so the US$4,000 hypothetically buys just US$1,000 worth of goods and services.
Back to the future
Inflation in the US began to rise in the early 1970s, after several decades of relatively low prices. According to the Congressional Budget Office, the US dollar lost roughly 75% of its purchasing power in the 70s.
“That’s how we dealt with the debt built up by the war in Vietnam, which by the way we lost, and the war on poverty, which by the way we lost. My suspicion is that over the next 10 years, the purchasing power of the US dollar declines by 75%,” says Rule, who began his career in the securities business in 1974.
The renowned investor is “not suggesting that gold runs thirtyfold from here”. He is suggesting there’s a probability the precious metal’s rise keeps pace with the decline in purchasing power of the US dollar.
“That’s a pretty attractive proposition. People ask me, ‘Well, Rick, you’ve been bullish on gold for at least five years. What would make you sell?’ That one’s easy too. If the reason to own something goes away, the thing has to go away. So they would need to balance the US,” Rule adds.
“They would need to have positive interest rates in the US. By positive interest rates, I mean that the interest on the US 10-year Treasury would have to be larger than the deterioration in the purchasing power of the US.
“And they would have to have a fiscal plan in place to deal with US$100 trillion in the net present value of government liabilities. I suspect 10 or 12 years from now, we’ll get there but I don’t suspect in two or three years we’ll get there.”
So how will this all affect gold’s price?
Gold has danced to its own rhythm in Q2 2025, with spot prices surging at the beginning of the quarter, as reported, buoyed by geopolitical tensions and shifting monetary signals.
JP Morgan reports gold prices have rallied significantly this year, climbing as much as 30% year-to-date in April, surpassing its previous forecasts, reported by this news service.
The firm notes gold’s price has exhibited volatility over the years. Prices fell 40% from 2011 to 2015 before fully recovering in 2020 amid the pandemic. Since late 2023, the yellow metal has experienced a strong rally, consistently reaching new all-time highs.
While Rick Rule remains uncertain what effect replicating the aforementioned move of the 1970s will have today on the gold price, he suspects the number will likely be much higher than lower.
“So I am and remain a gold player,” Rule adds.
Write to Adam Orlando at Mining.com.au
Images: Unsplash, iStock & B2Gold
