Rick Rule: U.S. Dollar at Risk, Gold as Critical Insurance

Rule’s journey into natural resources was sparked by a love for the outdoors in his youth, a passion that, ironically, led to a 50-year career "cooped up in an office." Yet, he finds the resource business "endlessly fascinating" and relatively simple compared to other industries like technology, driven by cycles and contrarian principles.

The core of Rule’s philosophy on precious metals is a firm rejection of the idea that gold is merely a speculative asset. He holds a stark view on the fragility of the US currency's purchasing power.

"I don't own gold to make money. I own gold to maintain my purchasing power. Think of it as insurance."

He stresses that, like a fire or life insurance policy, one hopes the underlying economic disaster that causes the gold price to soar never occurs. When discussing the potential for a Federal Reserve rate cut, Rule cuts through the noise of daily market volatility, arguing that the tone of the Fed’s communication is far more important than the quarter-point action itself.

The investor segments the precious metals market into three distinct areas:

Rule believes the US is heading for a “reckoning” due to "deep, deep, deep structural issues that aren't addressed either by a rate cut or by politics," citing over $100 trillion in unfunded liabilities. His forecast is a deliberate and historical one: a replay of the 1970s.

"We went through this in the decade of the '70s. We reduced the purchasing power of the US dollar by 75%. We slow the growth of government. And ultimately, that's probably enough to get us through. But there's a 10-year reckoning until it does."

Based on the 30-fold increase in the gold price during the 1970s' 75% dollar devaluation, Rule argues that while he doesn't expect a repeat of that magnitude, a significant appreciation in gold's nominal US dollar price is "arithmetic symmetry." He suggests the nominal price of gold "could be expected to increase threefold or even fourfold over 10 years."

Rule notes that the structural problems in the economy, including a segment of the American workforce lacking the skills to compete globally, will not be fixed by monetary policy alone. While technology offers an ultimate salvation, he sees the immediate economic path forward as one of currency devaluation to manage unpayable debts.

Rule’s long history gives his forecast significant weight. His clear distinction between gold as wealth preservation and gold equities as an investment/speculation vehicle is essential for any serious resource investor. By framing the dollar’s expected decline as a necessary political and financial strategy to manage liabilities, he shifts the focus from simple market fear to a long-term, calculated risk management view.

His practical advice for investors emphasizes discipline and knowledge. He strongly cautions against buying stocks simply based on a recommendation, including his own.

"Buying it simply because I said so and then not paying any attention to the reasons that I bought it is counterproductive."

Instead, he urges investors to do their own work and limit the number of speculative stocks they own to correspond with the hours they are willing to dedicate to research. For most, he recommends sticking to the "best of the best" high-quality, large-cap resource companies that provide sector outperformance (beta) without requiring inordinate work.