A discussion at the Chartology Forum …sparked my interest in this topic

Question:

“Why gold , as measured in USD’s ,should be going up ~10% PER YEAR in the U.S.

The real inflation rate is the cost of living — PERIOD. Not some voodoo measure the FED puts out, ex., energy and food, to hide inflation … core CPI’s around 2% currently … sure it is.

The government nor FED will ever be our friend, at least, not for the common man who desires economic freedom and wealth preservation. Which, for the former, seems to be few and far between these days … some day people will wake up when they’ve had enough, I know I have.

Quite shockingly, I took the low in 1999 at $250/oz and compounded the number by 10% each year and in 2019 gold should equal $1681/oz and in 2020 gold should equal $1850/oz. This does, however, not take into account how much inflation occurred after Nixon erased the gold standard in the 1970’s. Therefore, my conclusion is, gold should be much, much higher currently if it does in fact maintain purchasing power over decades. I submit it should probably be north of $2500 to $3000”

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Fully’s Rebuttal : ( I obviously have too much time on my hands 🙂

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I do not get what you mean here regarding the Gold price not keeping up with real inflation.

You acknowledge that gold has gone up close to 10% compounded yearly since 1999 ….I don’t really know why it HAD to do so

BUT OK…It Did…it’s right about where it should be( about 10% off) based on your thesis of 10% compounded inflation per year….which is a huge stretch IMHO.

What other commodities of finished products have gone up 10% per anum for the last 20 years ?

Milk , Bananas ,Suits, Oil ? I don’t think so …but even if 10% real inflation is true Gold is not far from where it “should” be

Then you say BUT in the 70s after the gold window closed there was massive inflation and this is not reflected in todays price ?

But in the 70s Gold went from $35 to $800 !

1971 the price was let loose and so 9 years at 10% compounding that would be what ? It would be $82.50 ….in 1980…but gold was almost 10X that number. at the manic peak in Jan 1980. It overshot by a factor of 10…it was ridiculously overpriced !

20 years later ( 2000)… the price was $250 …Again using 10% compounding from 1971 to 2001 …Gold “should have been $571 an ounce ( it was too low by a half if you still assume 10% compounding inflation per year.

And a few years later it was ‘correctly priced at about $650 .

You are completely defeating your argument that the Gold price should be much higher than it is now if not for MANIPULATION

Lets do the math.

First of all lets assume your theory that there has been 10% inflation on average every year since 1971 when Nixon did the nasty

What is $35 compounded at 10% for 48 years ?

$3600

SO if inflation has really been 10% per year since 1971 yes Gold is too low by more than half

BUT what if its been 5% per year ?

I am using this great tool

https://www.calculatorsoup.com/calculators/financial/compound-interest-calculator.php

Gold should be $364 an ounce TODAY !!!

lets split the difference

at 7.5% compounding since 1971 ( 48 years ) we get

$1,126 should be today’s price.

Any way you slice it and dice it you can figure out If Gold is keeping up with REAL Inflation

All you need to do is Define REAL inflation and have real scientific PROOF for whatever % you can come up with

on the average annual inflation rate.

As far as I am concerned Gold has been doing just fine if you define its value from 1971.

Using the table below and compounding inflation of 10% per year from 1971 to 2019

1971

Cost of a New Home: $28,300.00
Median Household Income: $9,028.00
Cost of a gallon of regular gas: $0.36
Cost of a dozen eggs: $0.53

2019
New Home = $2,717,000
Median Income = $866,843
Gallon of Gas = $34.57
Dozen Eggs = $50.89

Obviously that 10% Real Inflation figure is NOT what has happened

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Lets try 5%

New Home = $294,000
Median Income =$93,902
Gallon of Gas =$ 3.74
Dozen Eggs =$5.51

Well these numbers are much more in line with reality

(New Home is a little low

Median Household income a little high

Gas and eggs are close)

So assuming 5% per anum REAL inflation since 1971 ( as opposed to the Fed’s Bullshit 2% target)

The price of Gold should be today

$364 !

Looks like someone has been strongly manipulating the price UP !

?

Bottom Line…If you plug in 8.1% compounding inflation for 48 years starting with $35 …you get today’s price of gold

of about $1470.

Clearly Gold is outperforming Eggs Oil Homes and Income !

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Real Bottom Line : What is Anything worth ?

It’s worth what someone will pay for it !

We all think / wish Gold was “worth” more

But how many of us are buying real physical gold here at $1450 . ( Not I )

Most of us bought some a lower prices , but have not bought any more for years.

But yet we expect others to pay these prices and more

Strange ?