Gold Gains In Price Only – Not In Value

GOLD GAINS IN PRICE ONLY

It has been said that the more things change, the more they remain the same. That is certainly true of gold prices.

Let’s look at the following three charts in succession. Then we’ll talk about them…

Current Gold Prices (inflation-adjusted) – 100 Year Historical Chart

October 2021 Gold Prices (inflation-adjusted) – 100 Year Historical Chart

December 2017 Gold Prices (inflation-adjusted) – 100 Year Historical Chart

All three charts are the same except for the additional price action shown since the date of the previous chart. Also, the price peaks have been updated to reflect the effects of inflation on the original previous prices.

Here is the information in table form with an explanation afterwords…

ACTUAL PRICES                                                      DEC2017         OCT2021        CURRENT

JANUARY 1980    $  678 oz.                                $2175 oz.         $2380 oz.        $2505 oz.

AUGUST 2011       $1825 oz.                               $1990 oz.         $2210 oz.        $2315 oz.

AUGUST 2020.      $1970 oz.                                                            $2078 oz.        $2179 oz.

The column on the left lists the prices in effect on the dates indicated. In other words, the average monthly closing price for gold in January 1980 was $678 oz.; in August 2011 it was $1825 oz., and in August 2020 it was $1970 oz.

The three columns on the right list the inflation-adjusted prices which correspond to the respective price peaks. For example, after adjusting for the effects of inflation, $678 oz. in 1980 is the equivalent of $2175 oz. in December 2017. In October 2021, the effects of inflation had taken that number to $2380 oz. Currently, the $678 oz. peak from 1980 is the equivalent of $2505 oz.

The price of gold continues to increase reflecting the deterioration and loss in purchasing power of the US dollar.

However, in inflation-adjusted terms, the price of gold has never exceeded its 1980 peak and has actually failed to match it, both in 2011 and 2020. In addition, each successive peak is visibly lower than the previous peak.

IS GOLD DECLINING IN REAL TERMS? 

Is gold declining in real terms? Not likely. One factor which might be keeping gold from matching its previous price peaks is that the overall effects of Federal Reserve inflation are continuing to have less and less impact. (see Everything Peaked in 1980 – The Waning Effects Of Inflation)

However, since gold’s higher price over time is a reflection of the ongoing loss in purchasing power of the US dollar, it cannot be expected to exceed previous price peaks on an inflation-adjusted basis.  (see The Meaning Behind Gold’s Triple Top)

GOLD IS REAL MONEY – NOTHING ELSE

Gold is real money and the original measure of value for everything else. Gold’s value is in its use as money and that value is constant.

The price of gold cannot exceed previous price peaks on an inflation-adjusted basis.

War, social unrest, political turmoil, economic conditions, interest rates, housing starts, etc. have nothing to do with the price of gold or its value. The only reason for a higher gold price over time is the loss in purchasing power of the US dollar.

Gold’s higher price in dollars at any time NEVER represents an increase in gold’s value and is ALWAYS indicative of dollar weakness that has already occurred.

Price expectations for gold by marketers and investors need to be modified, not amplified.

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and ALL HAIL THE FED!