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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.

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6 comments

  1. When you have time.. do watch the vid.. Note this was create LAST year. Gold today is at 1400. From what I am looking at.. trends.. the next couple of months will say it all. My feel is that inflation will occur in some sectors. The problem again is JOBS.. you need a product/service to sell to stimulate your country’s growth. This country is built on middle class. It is fading away. I hope you all don’t have mega debt. I just got a letter today from Bank of America.. telling me that they are lowering the amount I can borrow on my home equity credit account.. (which I canceled BTW) It at one time was set at 40K. Today it went down to 32K. oh boy!! When I saw this.. this tells me that Bank of America is seriously worried. Here I have a credit score of 812. Never have been late on house payment.. yet they are lowering my limit..???

    FDIC Fridays are still going on.. Shelia Blair is still at the helm.

    Obama’s visit to India is all about the CURRENCY.. our dollar. India is the second country which holds most US treasuries with the first being China. It wouldn’t surprise me to see the Dollar going bye bye.


  2. Low job growth/high jobless rate does not create inflation….quite the opposite.

    BOA lowered your borrowing limit because the sales price of your house has gone down. Now that the horse is out the banks are being carefulish.


  3. Dog.. tell me what causes Inflation.. if people don’t have jobs,and demand for product is the same =>supply for product or service decreases.. I wish I can draw a simple supply and demand chart here. You’d think that prices would accommodate this decrease in demand.. but in order to survive competitively.. companies will Increase their prices due to high rise of production costs! (you need people to make the product/service)

    http://en.wikipedia.org/wiki/Inflation


  4. Those are about the UK… And they are whining about 3% inflation? That is low by most standards.
    In the US this year it is about 1.5% – last year it was negative! That is deflation. Will inflation come again some day? No doubt – but not nearly as soon as the fear mongers and gold floggers are saying. Not going to happen as long as unemployment is high and the economy is in the dumpster.



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