And the Real Inflation-Adjusted High for Gold Is...

Most people will tell you gold’s inflation-adjusted all-time high is around $2300. $7150 is more accurate, according to John Williams, economist and editor of Shadowstats.com. He made that claim in an interview with Bloomberg:

If the methodologies of measuring inflation in 1980 had been kept intact, gold would have to hit $7,150 to be the equivalent of the 1980 record.

He said the government has understated the cost of living over the past two decades with adjustments in the way it measures the basket of goods and services monitored by the U.S. consumer price index, or CPI.

John Nadler, a senior trader for metals-dealer Kitco is skeptical about the gold run. He thinks that once the Fed starts tightening, the trend will reverse:

These wild calls for several-thousand-dollar gold are typical of times when gold goes into uncharted territory.

The Fed will pull the interest-rate trigger and the Obama administration will, in addition, pull the tax-hike trigger before we get into any serious inflation. Once the man on the street gets in, the gold rally is likely over

Maybe the Fed actually will tighten when the time comes. But I’ll believe it only when I see it. I think more easing will happen before any tightening does. Fed liquidity is the only thing holding this market up. It largely depends on how long our creditors are willing to buy our bonds. If the Fed could get away with 10% inflation for a while, I think they do it in a heartbeat.

Comments

[frdm45:]

Please don't quote Jon Nadler. He practically screeches not to buy gold, and his main desperate argument against it consists of calling his opponents names, and offers very few facts, just small anecdotes and soundbites. I personally think gold could go either way, but the arguments for upside over the medium term seem to far outweigh the case for much of a downside. Nadler must hold a bunch of shorts, or maybe his bullion bank is worried about customers increasingly taking physical delivery of bars that have been sold or leased multiple times..........

Oct 20 06:17 AM

[jockum:]

Obama will take jobs over riots,,,, ANY day. Than means inflation, because the USD will move lower against China, Norway, Australia, Saudi and all other nations that have their public spending in order. GBP will probably move in tandem with the USD. Gold might however have less of a run compared to Silver, since silver has more industrial uses than gold. And people do not fix their teeths with gold any more, that leaves vanity and stockpiling. And I think the industries like RFID that uses silver, might move up before the level of stockpiling and vanity spending increases.

Oct 20 08:42 AM

[Old Trader:]

jockum,

Don't forget jewelry. Something like 25-30% of gold production goes to that use. India in particular is large market for gold jewelry.

Oct 20 10:18 AM

[ebworthen:]

jockum - I fix my teeth with gold. Two lower molars now probably worth $1,500 a piece. I had two dentists tell me it was the very best crown you can get, lasts 30 years or more.

The physical demand for gold will not slacken. I believe that many will start acquiring physical gold, as it is not traceable the way a bank or fund balance is (i.e. - to be taxed or confiscated).

Yes, FDR "confiscated" gold, but they didn't go door to door rooting through dressers; it was a "voluntary" confiscation and only netted 15% by most estimates.

The underground economies are gearing up to skirt the tyranny of the banks and governments. This morning I heard the IMF propose themselves as the "World Central Bank" and that they would charge fees to create an FDIC like insurance fund. The best reason I've heard since the bailouts to hide my money in untraceable commodities and go underground!

Oct 20 10:34 AM

[Slvrizgold:]

FRDM45: You are exactly right in your intuitive assumption. The bullion banks are SHORT gold and silver. They sold all kinds of "pool" accounts, and various paper claims on gold and silver, practicing a form of "fractional reserve banking". If all paper holders tried to take delivery, they would be up chit creek without a paddle and it would be OVER for them. That could be why Kitco employs this Jon GONADler shill who writes a column every single day about why buying a lot of gold and silver is a dumb idea. It seems counterintuitive until YOU UNDERSTAND WHY!

Oct 20 10:55 PM

[Ad Orientem:]

IF a significant move by the FED to tighten were to come (I am dubious to say the least) that would indeed be a signal to start scaling back metal exposure. The problem is that the FED really can't tighten when unemployment (according to the same people who have provided us with this new inflation adjusted number) stands at around 17%. It would create an economic apocalypse.

We are in a depression. The time to tighten policy was about 6 years ago. It's too late now. We are between a rock and a hard place. Sometimes in life there are no good choices. This is one of those moments.

Oct 20 11:53 PM

[Angel Martin:]

It only makes sense to value gold relative to the peak of the last bubble, if gold is in another bubble right now.

Oct 21 08:00 AM

[5142152-337:]

This comment is tardy, but needs to be made!

Jon Nadler is enthralled with himself! Whatever he saysregarding PMs RUN, don't walk, the OTHER WAY! You will stay light years AHEAD using that formula.

Oct 21 09:37 PM

[Plan B Econ...:]

According to CIBC WM gold is expensive relative to other commodities. Doesn't mean it can't go up...

www.planbeconomics.com...

Oct 21 10:37 PM