Gold has pushed past the historic $2,000 level. Given that global central banks seem to believe that printing money has no cost, higher gold prices are assured, despite temporary pullbacks here and there.

A lot of recent commentators would disagree, of course. Some call the metal overhyped or overrated. Others point to March, when Covid first began running amok in America, and note that gold prices sank alongside stocks – proof, they suppose, that gold isn’t a hedge against falling stock prices or crises.

I see that moment totally opposite. Gold, in the early stages of a crisis, served its exact purpose: It provided immediately liquidity, in this case to leveraged stock investors needing to meet margin calls, and then it immediately sprinted higher as savvy investors traded what they knew were going to be increasingly worthless greenbacks for the only money – literally – that has survived the test of time.

But, frankly, niggling over the direction of the next $100, or even $1,000, in the gold market is a bit pointless. Because given where we are economically, financially, and monetarily, the bigger question to ask is whether we’re headed for a modern version of the Great Depression. If so, the price of gold today is but a fraction of where it’s likely to end up.

Now, if you believe in a V-shaped recovery or that “the Fed’s got this,” you probably should stop reading now. You will not agree with anything behind this point.

If, however, you recognize the exorbitant risks in the system these days, then you might be thinking about the future of gold as a protector of wealth. That’s the role it played in the Great Depression, for both the US government and investors wise enough to own exposure to the metal. And that's why our story gets interesting.

See, after April 1933, Americans could not legally own gold (except numismatic collectibles and jewelry and such). But they could own exposure to gold through what was then the biggest gold miner on the Street: Homestake Mining.

During the Great Depression, gold prices rose to $35 per ounce from $20.67, a function of FDR confiscating the metal and repricing it higher to save the US dollar and the US economy. Americans didn’t benefit from that. In fact, they were hurt by it because FDR’s move immediately and sharply devalued consumer dollars.

But those who owned Homestake? They were rolling in increasing piles of wealth.

Over the course of the Great Depression – let’s call it 1929 to 1935 – Homestake’s earnings explode higher to more than $32 a share from just over $4. Its annual dividend payments rose to $56 per share from $7. And the share price more than quintupled. In all, every $1 invested in Homestake in the fall of 1929 was, by 1935, worth about $6.20 because of dividends and stock-price appreciation – an annual rate of return of nearly 36%.

That’s wealth protection.

I’m not saying the exact trajectory awaits modern gold miners. But Homestake’s history is an indication of what the future potentially holds.

Miners are leveraged plays on gold. Their fixed costs don’t change much as gold prices rise. Thus, every extra dollar that gold attains is, save for a few taxes and whatnot, cash that flows almost unimpeded to a miner’s bottom line. Better yet, each of those additional dollars spreads across hundreds of thousands, or millions of ounces of annual gold production. Higher gold prices, thus, become windfall profits for miners, not unlike $100 oil prices transforming into windfall profits for the likes of Exxon (XOM) or Chevron (CVX) or Apache (APA).

And windfall profits lead to surging stock prices.

How to play this? I’ll give you that answer tomorrow. But I will say this: Beware certain gold ETFs – they might just harbor more risk than you know.