Archive for November 9th, 2010

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The Myth of High Gold

November 9, 2010

“Gold sets record high amid economic fears,” The Associated Press recently wrote. “Gold surges to record high,” CNN said. Gold closed Monday “at a record $1,402.80 per troy ounce,” the front page of The Wall Street Journal reported Tuesday.
It’s a good story. Unfortunately, it’s not true, at least not in any meaningful sense.
Gold is at a record only if you fail to adjust for inflation. And you should almost always adjust for inflation

The notion that gold is more expensive than ever happens to fit with a larger narrative that also does not square with the facts – namely, that inflation is an imminent threat. This can be a bit confusing, I realize, because inflation plays two roles in the story: past inflation distorts our view of record highs, while future inflation is the concern of some of those people making a big deal out of gold.