While the most recent jobs report (released on Mar. 6) raises questions on some of those prior assumptions around the underlying health of the consumer economy, it is the broad-ranging implications of Operation Epic Fury that appear central in the new storyline shaping the markets.

How much physical damage will be sustained by key infrastructure across the region? Will it be a protracted engagement with numerous casualties? How long will the flow of oil and natural gas from the region be disrupted? These are key unknowns whose answers are likely to drive the market’s action over the coming days and weeks. We hope for a rapid de-escalation and conclusion of active military operations but acknowledge the possibility of a messier outcome. In the meantime, there appears to be a good likelihood that factors such as size/liquidity and quality, features that fell back in perceived importance over recent months, will reassert themselves as investors consider the resiliency of their portfolio holdings.

A History Lesson on Gold and the US Dollar

For much of modern history, gold played a central role in the U.S. monetary system. Under the Gold Standard, the U.S. dollar was backed by a fixed amount of gold held by the government. This meant that, in theory, paper currency could be exchanged for physical gold, giving people confidence that the value of the dollar was tied to a tangible asset.

The United States formally adopted the Gold Standard in 1900, although gold had influenced U.S. currency policy long before that. For decades, this system helped create stability and trust in the dollar. After World War II, the global monetary system was reorganized through the Bretton Woods agreement, where the U.S. dollar remained convertible to gold for foreign governments at $35 per ounce while other currencies were tied to the dollar.

However, as global trade expanded and government spending increased, maintaining a fixed link between the dollar and gold became increasingly difficult. In 1971, President Richard Nixon ended the dollar’s convertibility into gold, effectively ending the Gold Standard and shifting the United States to the fiat currency system we use today.

While the dollar is no longer backed by gold, the strength of the U.S. currency today rests on different foundations: the size and productivity of the U.S. economy, the stability of its financial institutions, and the global demand for dollars in trade and finance. As a result, the U.S. dollar remains the world’s primary reserve currency and a cornerstone of the global financial system.

In other news, gold nearing $5,000 an ounce almost feels like it has broken free from normal financial gravity. Its surge is a reminder of just how uncertain and chaotic the global environment can feel at times.

For some historical perspective, gold was around $800 per ounce in January 1980. Today that same ounce is worth roughly $5,000. A meaningful increase, no doubt. But the long-term comparison with equities tells an important story. If that same $800 had been invested in the S&P 500 in 1980 and simply left to compound, it would be worth roughly $150,000 today.

It’s a good reminder that while gold often shines during periods of uncertainty, long-term wealth creation has historically been driven by productive assets that compound over time.

***And don’t forget, you still have until April 15th to fund your 2025 IRA or Roth IRA contributions if you haven’t done that yet***