Gold is nowhere near its old highs

September 3, 2009

A great factoid from the Calafia Beach Pundit, Scott Grannis:

Gold prices peaked in January 1980 at $850. In today’s dollars, that would be equivalent to $2,300. (The chart shows a peak of $1,800 because it uses month-end data.) So in rough terms, let’s say that gold today is worth about half of what it was at the peak of the inflation fears in early 1980.

Gold prices rise when there is “too much money” in the system; when people fear that an excess of money will depress the value of their money. Gold prices also rise when people are just plain scared about something going very wrong.  …  Could gold rise above $1000? Why not? Could it get to $2000? Perhaps, but I think things would have to get an awful lot worse than they are today.

3 comments

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I like your way of thinking…..

Gold is valued in American dollars, and essentially American dollars are valued against gold. So to wonder why gold is so much lower than the 80s, it just shows how strong the USD got in the last 25 years of bubble booms. For those that feel that gold ‘should’ linearly follow an inflationary rate of increase, that should tell you how much systemic weakness is left to be exposed in the USD. That being said, basing a theory based on extreme values is a weak case… gold maybe has legs for $1200 tops. It’s not to say that this crisis isn’t bad, it’s just not as dewatering (yet) of USD like the early 80s was. A $20 trillion national debt in 10 yrs might change that though, but not before. And 10yrs is a LONG time to change things so it never gets to that point. Just my opinion.

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[...] James Pethokoukis » Blog Archive » Gold is nowhere nearby the aged … [...]

Great article. We’ve got a long way to go. Thank the Lord I’ve been stashing away bullion throughout the past few years. I really like the Pamp Gold bars and my favorite silver is the Buffalo Rounds that Scottsdale Silver sells. I live in the US, work int he US, and plan on retiring in the US. A little precious metal goes a long way to diversifying my life.