Charles Stahl, a well-known expert on the private gold market, has warned advocates of a gold standard that it would take "well into the 1990s" before it could be reintroduced in the United States, "and that certainly would be too late to lower interest rates."
Stahl, who is the publisher of Green's Commodity Market Comments, is an avowed opponent of any form of gold-dollar link. He also said that if the United States ever were to go back on a gold standard to support its currency, "Gold will embark on an alpine climb, and the 1980 gold Everest of $875 an ounce will be easily left behind." His forecasts of gold price movements are respected by market traders.
Economist Arthur Laffer, one of the major proponents of a return to a gold standard, has predicted that if and when the United States announces its intention of re-establishing a gold-dollar link, the price would decline to somewhere in the $250-$300 level from the current $450-an-ounce price.
The question of a return to a gold standard has gained increased attention in recent weeks with the activation of a U.S. Gold Commission, scheduled to report to Congress next year on the potential for gold's role in the domestic and international monetary systems. The commission, which is split between pro-gold and anti-gold factions, has held two meetings so far. The subject will also come up at next week's joint annual meeting of the World Bank and International Monetary Fund.
Laffer and other committed "supply-side" advocates outside of the Reagan administration have been pressing for a quick resumption of dollar-gold convertibility, arguing that the president's program has failed to restore faith in paper money. They cite high interest rates as evidence that a "greater discipline" is needed in managing the nation's money.
Stahl labels the current discussions "a waste of time" in his most recent market letter, which is dated Sept. 23. Even assuming that a gold standard would solve current economic problems -- an assumption he rejects -- he says "there is no practical way to implement a gold-standard system within a reasonable time.
"In today's world, no country can maintain a gold standard alone. We have an international monetary system, which is governed by IMF statutes. Those statutes can only be changed by negotiations and agreement among all members of the IMF." Even if the Gold Commission were to report favorably on a gold standard next year, and negotiations started at once, ratification couldn't take place until well into the next decade, Stahl says.
In discussing price prospects, he pointed out that legislation in the Senate reflecting the Laffer proposal provides that gold would be fixed at the world market price six months after the United States signifies it is going back on a gold standard. In that period, both the Treasury and Federal Reserve would be barred from intervening in the gold and foreign exchange markets.
"With the Fed and Treasury out of those markets as a stabilizing factor, can anyone really believe that the price of gold will go anywhere but higher?" Stahl asked rhetorically.