The Myth of Gold as an Inflation Hedge

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 |  Includes: DGL, GLD, IAU
by: Paul Price

Buyers of gold in 1980, when the metal was 'hot' and inflation was rampant, were told that the precious yellow would protect their buying power over time.

Was that true?

The average price of gold was $612.56 that year and $610.00 twenty six years later in 2006. How much did the dollar's buying power decline in those 26 years?

From the 1980 average price of $612.50 gold declined to an average price of just $272.22 - or (55.56%) when it bottomed in 2001. Twenty one years of no income and capital losses.

Don't believe today's commodity crazies that would have you load up on tangibles right as they are at all-time highs. Learn from the past to avoid repeating the errors of past generations.

Year.......Average New York Market Price

(U.S. dollars per fine ounce) prices are not inflation adjusted.

1980 ................612.56
1981 ................459.64
1982 ................375.91
1983 ................424.00
1984 ................360.66
1985 ................317.66
1986 ................368.24
1987 ................447.95
1988 ................438.31
1989 ................382.58
1990 ................384.93
1991 ................363.29
1992 ................344.97
1993 ................360.91
1994 ................385.42
1995 ................385.50
1996 ................389.09
1997 ................332.39
1998 ................295.24
1999 ................279.91
2000 ................280.10
2001 ................272.22
2002 ................311.33
2003 ................364.80
2004 ................410.52
2005 ................446.00
2006 ................610.00
2007 ................702.57

Disclosure: no position