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totalcount
Penny Sorter Member
USA
77 Posts |
 Posted - 11/22/2009 : 20:14:25
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I've been wondering what the price of gold would be if it were purely an inflation hedge. To figure it out, all you have to do is pick a date when the dollar and gold were properly balanced and multiply by the inflation since then. Picking that date turns out to be hard, so here is the inflation adjusted price of gold for several key dates.
Inflation from January 1934 - January 2009 was 1,499.57%
Inflation from January 1971 - January 2009 was 430.51%
Inflation from January 1974 - January 2009 was 353.10%
Inflation from January 1980 - January 2009 was 171.39%
Gold in 1934 (FDR raised the price of gold) was $35/oz
Gold in 1971 (end of the gold standard*) was $40.62/oz
In 1974 the average price of gold was $154/oz
In 1980 the average price of gold was $615/oz (the high until 2007)
Given this if you assume the correct price in gold was $35/oz then adjusted for inflation it should be $524/oz
If you assume the correct price in gold was $42/oz then adjusted for inflation it should be $166/oz
If you assume that the correct price was $154/oz then adjusted for inflation it should be $544/oz.
If you assume that the correct price was $615/oz then adjusted for inflation it should be $1054/oz.
I think there is good reason to think that the $42 was artificially low. By any of these measures, gold is currently overpriced. (keep in mind that these are the average prices for the given years, not the high price).
Again, this is only looking at the price of gold in terms of past inflation, not in terms of inflation expectation, or as a long term crisis hedge.
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* According to Ron Paul, we are still on the gold standard. You must be logged in to see this link.
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What SHOULD the price of gold be
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