"Everything you need to know about gold"
The correct definition of inflation is “the debasement of money by government and central banks“.
The effects of inflation show up in the form of higher prices for all goods and services.
Hyperinflation is defined as “out-of-control general price increases in an economy, …typically measuring more than 50% per month.” (source)
There are two specific reasons why hyperinflation re: out of control general price increases for all goods and services, possible US dollar collapse, etc., is unlikely.
CONSUMER PRICES NOT REFLECTING HIGHER INFLATION
As of November 30th, the annual inflation rate for the year 2020 is 1.17% (CPI). And it is not likely to get a whole lot worse anytime soon.
When the Federal Reserve responded to the financial crisis of 2007-08 with hugely unprecedented monetary expansion efforts, many thought that it would lead to runaway inflation and collapse of the U.S. dollar. It didn’t; and the expected higher inflation rates did not occur.
The gold price is not about gold. In fact, it tells us nothing about gold.
So why are people so obsessed with the price of gold? In most cases, it is because people likely view gold as an investment opportunity. “How much can I make and how quickly?”
However, the question which continues to plague gold investors and others is “Why didn’t gold respond the way we expected?”
The answer is found in the term unrealistic expectations.
When gold is characterized as an investment, the incorrect assumption leads to unexpected results regardless of the logic. If the basic premise is incorrect, even the best, most technically perfect logic will not lead to results that are consistent.
Here are some examples of inconsistencies when viewed through the lens of faulty logic based on incorrect assumptions…
Expecting higher gold prices? Read on…
From Wikipedia:
“In English, the phrase fly in the ointment is an idiomatic expression for a drawback, especially one that was not at first apparent, e.g.
We had a cookstove, beans, and plates; the fly in the ointment was the lack of a can opener.”
For four centuries, ‘a fly in the ointment’ has meant a small defect that spoils something valuable or is a source of annoyance. The modern version thus suggests that something unpleasant may come or has come to light in a proposition or condition that is almost too pleasing; that there is something wrong hidden, unexpected somewhere.”
In general, with gold prices currently at $1500-1600 per ounce, the expectation among participants in the gold trade today is for much higher gold prices going forward. And most of them, I think, seem to believe it will happen sooner, rather than later; and quickly, too.
Their enthusiasm rests on two assumptions: 1) That the new unlimited amounts of cheap credit made available by the Federal Reserve is hugely inflationary. 2) That the effects of the inflationary avalanche will destroy the US dollar, thus resulting in higher gold prices.
On the surface, both statements are logical and rooted in correct fundaments. But there is a fly in the ointment.