Gold Prices, the Dollar, and Inflation: Most People Still Get This Wrong, Says Rick Rule

Veteran resource investor Rick Rule says official inflation figures badly understate the erosion of the U.S. dollar's purchasing power, and that the gap between the reported rate and the real one is the strongest argument for owning gold.

In an interview with tastylive host Ilya Spivak, Rule, founder and CEO of Rule Investment Media, said investors who trust the Consumer Price Index are misreading their returns. He pointed to the 10-year Treasury, which has recently yielded about 4.4 percent.

"If you believe in the CPI, and you believe that the destruction of your purchasing power is clipping along at two and a half or 2.6 percent, then current interest rates seem very adequate," Rule said. "My problem is, I don't."

Rule said the basket of goods and services he actually buys suggests inflation closer to 8, 9 or 10 percent. By that math, he argued, a 4.4 percent yield in a currency losing value at 9 percent is not a gain.

"You aren't making 4.4, you're losing 4.5," he said. He cited a characterization by investor Mike Maloney in dismissing the official measure, calling the CPI "the CP lie."

A Five-Year Lag

Rule, who said he began reading hard-money and Austrian economics texts in 1968 as a high school student, argued that the public is slow to react to inflation because expectations are anchored to recent experience.

He recalled that even as a McDonald's hamburger climbed from 20 cents toward a dollar and gasoline jumped during the Arab oil embargo, most investors did not begin reacting to inflation until around 1972, roughly five years after academics and politicians had flagged it.

"Investors' expectations of the future were set by their experience in the immediate past," he said, noting that the 1950s and 1960s had been optimistic decades defined by high-growth darlings like the Nifty 50.

Rule said the same lag is unfolding now, following what he called the most benign economic climate in human history between 1982 and 2022.

Gold as Insurance

Rule rejected the common framing of gold as a speculative or investment asset, calling that a misreading shaped by a 50-year hiatus.

"A thousand years of human history teaches us that gold is a liquidity class or an insurance class," he said. "Right now, people don't feel the need for insurance."

He said fear tied to war or political unrest tends to move gold only in the near term, with little lasting effect, except for refugees and others who have used it for survival. For most people, he said, the durable driver is protecting savings from currency depreciation. The moment broad recognition of that sets in, he added, is when gold performs, and he suspects that shift is coming.

The Case for Uranium

Rule said the easy money in many commodities has already been made, including uranium, which he noted has climbed from about $20 a pound to roughly $85. But he argued the surer opportunity still lies ahead, driven by surging global power demand that he expects to double by 2050 and by a renewed focus on energy security.

He said the recent conflict involving Iran has revived a concern that had been dormant for 50 years, since the 1973 oil embargo pushed France and Japan to build out large nuclear fleets. Uranium, he said, is the only fuel dense enough to give energy-poor nations like Japan, South Korea and Taiwan a multiyear strategic reserve.

"The biggest unsung beneficiary, if there are ever beneficiaries of a war, would be uranium," Rule said.

He noted that the world is producing less uranium than it consumes, with Japan accelerating restarts of plants idled after Fukushima and countries that once swore off nuclear power, including Germany and the United States, reconsidering it to power their economies and data centers.

How Rick Rule Plays it

For most investors, Rule said the lowest-risk exposure is the Sprott Physical Uranium Trust, disclosing that he is the largest shareholder of the manager though not an officer, director or employee. For those willing to take operating risk, he pointed to Canada's Cameco, which he called the highest-quality producer in the world.

Rule said he had sold his stake in Kazatomprom, the world's largest producer, over middle-management departures he could not explain. "If there's a risk I don't understand, I sell the stock," he said.

He was lukewarm on broad funds like the URA ETF, saying he objects to paying a fee for an index containing stocks he would not otherwise own. For investors who would rather not study the sector, he said, such a fund is "appropriate, if inelegant."

Mike Butler, tastylive director of market intelligence, has been trading the markets for a decade. He appears on Options Trading Concepts Live, Monday-Friday. @tradermikeyb

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