Gold: Protect Yourself from Future Inflation

In July of 2002, it cost the equivalent of 1.3 grams of gold to fill up your gas tank (15 gal) or about $20 when priced in dollars.*

In July of 2008, it still cost only 1.3 grams of gold, but $61 when priced in dollars** - (305% more)!

If you priced other necessities in gold such as food, utilities, health care, etc, you would get similar results. It's because of “Inflation” (rising prices due to increase in money supply) and with the way the Fed is printing up hundreds of billions in new money to bail out Fannie Mae (FNM), Freddie Mac (FRE), AIG (AIG) and all the big banks that caused the current mess (with the automakers next in line for a hand out), you needn’t be a genius to see that inflation will continue to increase in the future.

The truth is, the Fed is depreciating the value of your money with these insane inflationary policies. But you can protect yourself from the consequences of any future inflation by converting some of your dollars (unbacked, counterfeit paper money that is shrinking in value) into gold bullion coins (real money) that are increasing in value. If you’re a little short on savings you could substitute cheaper silver bullion coins for gold. Percentage wise they pretty much rise and fall in tandem.

*In July 2002 gas was $1.33/gal (nat’l avg), gold was $315/oz.

**In July 2008 gas was $4.05/gal and gold was $938/oz.

1 troy ounce = 31.1 grams

Comments

[Pipo:]

Read Jim Rogers Gold Outlook.

"The IMF has gigantic amounts of gold, maybe gold is going to go down for a while. If gold does go down, I'm going to buy more."

jimrogers-investments....

2008 Nov 10 06:23 AM

[JCW:]

I have to add my two cents after reading this. Generally the relation between inflation and gas prices is misunderstood. The gas price increasing by 300% would only reflect inflation if inflation caused the money supply to triple in those 6 years. Money takes on average, with creeping inflation, 20 years to double. I don't think our inflation is at 25% a year, which is what it would take for 300% over 5.

That is why gas fell back down, and historicaly, gas doesn't follow inflation anyway. I'm sure you can find a graph of gas vs inflation through google to verify.

That all being said, yes gold is a good buy . Inflation has been rising from 3% to almost 10% now, with some people forecasting 20% in the near future. There are other ways to hedge against inflation though.


On Nov 10 06:23 AM Pipo wrote:

> Read Jim Rogers Gold Outlook.
>
> "The IMF has gigantic amounts of gold, maybe gold is going to go
> down for a while. If gold does go down, I'm going to buy more."

>
>
> jimrogers-investments....

2008 Nov 10 11:14 AM

[NOWHEREMAN:]

Ever hear of Howard Ruff? You don't provide your age but I would guess from your picture that Mr. Ruff was being paid for his gold analysis before you were born.

He does not agree with your conclusion at the present time.

In fact you don't either as your last set of figures attests. November's national average for gas is around $2.50 so gold should be selling for around $600 or around twice the $1.33 provided. Unless you have other ratios undisclosed in the above article that are more relevant.

IMHO

2008 Nov 10 11:15 AM

[bowman711:]

There might be slight, temporary variations between gold and consumer products or investments as they go up or down, but gold should eventually settle at the approximate same relationship. To 'paultaut' - if gold's drop is less than the drop in oil, there will be some time for it to find its relative value. However, in the case of oil, I would say that it has dropped more than its economics in relation to gold should be; therefore, I would expect oil to increase in price to find its relative level with gold.

2008 Nov 10 11:49 AM

[OilyGasMiner:]

Jason, the proof is defiantly in the pudding. Both Gold and Gold equities is the only safe haven I see from the rapidly rising prices that NO ONE is focusing on.

OBBBAAAAAMAAA where are you?

2008 Nov 10 12:36 PM

[NOWHEREMAN:]

Bowman, good point. The volatility tends to obscure common sense.

2008 Nov 10 03:56 PM

[DGCmagazine:]

Excellent example. I enjoyed your logic very much but don't forget when you buy gold, as you suggest, to own actual gold bullion, not some paper representation of gold like an ETF.

Mark Herpel
[e-mail]

2008 Nov 10 09:08 PM

[SilverBug:]

The writer meant monetary inflation (or growth of the fiat-money supply), not price inflation (price changes, which could result from an increase in the supply of money, scarcity of goods, increase in the demand for goods, et cetera).


On Nov 10 11:14 AM JCW wrote:

> I have to add my two cents after reading this. Generally the relation
> between inflation and gas prices is misunderstood. The gas price
> increasing by 300% would only reflect inflation if inflation caused
> the money supply to triple in those 6 years. Money takes on average,
> with creeping inflation, 20 years to double. I don't think our inflation
> is at 25% a year, which is what it would take for 300% over 5.<br/>
>
> That is why gas fell back down, and historicaly, gas doesn't follow
> inflation anyway. I'm sure you can find a graph of gas vs inflation
> through google to verify.
>
> That all being said, yes gold is a good buy . Inflation has been
> rising from 3% to almost 10% now, with some people forecasting 20%
> in the near future. There are other ways to hedge against inflation
> though.

2008 Nov 11 04:48 AM

[Silverbug2:]

"The writer meant monetary inflation (or growth of the fiat-money supply), not price inflation (price changes, which could result from an increase in the supply of money, scarcity of goods, increase in the demand for goods, et cetera)."

Isn't monetary inflation...the same thing as "an increase in the supply of money"?

Price inflation is a symptom of inflation. Inflation is "an increase in the volume of money and credit realtive to available goods resulting in a substantial and continuing rise in the general price level." Webster's Seventh New Collegiate Dictionary.

2008 Nov 11 03:05 PM

[raytayzmd:]

I am so sick of hearing about Jim Rogers and his opinions...does he manage any funds where we can document his performance?...none that I know of...does he publish his brokerage statements to verify the trades he claims to be making?...I haven't seen any...the guy made his money with Soros thirty some years ago and then retired...for all anyone knows he may have done nothing more than Robert Precther who made a few million trading twenty years and then parked it in treasury bills and who since then hasn't been right about much of anything...

2008 Nov 12 12:20 PM

[jetsby10:]

raytayzmd, Does Jim Rogers manage any funds? He's got a few indexes named after him. He avoided the tech bubble. He avoided the housing bubble/CDO explosion. Rogers predicted the commodity boom back in 98. He was short Fannie Mae and Freddie Mac and all investment banks since last year. He's been spot on.

Jesus, you could figure this stuff out googling his name.


On Nov 12 12:20 PM raytayzmd wrote:

> I am so sick of hearing about Jim Rogers and his opinions...does
> he manage any funds where we can document his performance?...none
> that I know of...does he publish his brokerage statements to verify
> the trades he claims to be making?...I haven't seen any...the guy
> made his money with Soros thirty some years ago and then retired...for
> all anyone knows he may have done nothing more than Robert Precther
> who made a few million trading twenty years and then parked it in
> treasury bills and who since then hasn't been right about much of
> anything...

2008 Nov 12 12:32 PM

[raytayzmd:]

...."Does Jim Rogers manage any funds? He's got a few indexes named after him. He avoided the tech bubble. He avoided the housing bubble/CDO explosion. Rogers predicted the commodity boom back in 98. He was short Fannie Mae and Freddie Mac and all investment banks since last year. He's been spot on."???...prove it...show me his brokerage statements...show me a buy or sell recommendation with an entry/exit points...hell, show me a picture of his yacht...like every other pundit, all anyone ever sees are broad commentaries -- never anything concrete that can actually be measured and then compared against some standard...at least with the real source of Rogers' wealth, there are websites where you can actually see what George Soros is doing and look at his history to see well he's REALLY done versus the markets.

2008 Nov 12 01:38 PM

[Pennybags:]

raytayzmd,
C'mon, man--JRogers is well known for being ahead of the curve, waaay ahead in many cases. Why do you need to see his brokerage statements when he has gone on record countless times with his prognostications, in books and otherwise? (go educate yourself and verify it in his book "Hot Commopdities" published in Dec 2004; seems he easily called the 200%+ moon shots in just about every commodity under the sun).

On Nov 12 01:38 PM raytayzmd wrote:

> ...."Does Jim Rogers manage any funds? He's got a few indexes named
> after him. He avoided the tech bubble. He avoided the housing bubble/CDO
> explosion. Rogers predicted the commodity boom back in 98. He was
> short Fannie Mae and Freddie Mac and all investment banks since last
> year. He's been spot on."???...prove it...show me his brokerage statements...show
> me a buy or sell recommendation with an entry/exit points...hell,
> show me a picture of his yacht...like every other pundit, all anyone
> ever sees are broad commentaries -- never anything concrete that
> can actually be measured and then compared against some standard...at
> least with the real source of Rogers' wealth, there are websites
> where you can actually see what George Soros is doing and look at
> his history to see well he's REALLY done versus the markets.

2008 Nov 13 07:53 AM