Bruce Pile

Gold Stocks: The Ultimate Options Strategy

It's true that there was the inflationary event in 1934, during the pre-1968 era of the gold price being set by the government, when Roosevelt jumped the price from $20.67 to $35. This devalued the dollar as we are doing now. The gold standard was a major drag back then. Every major currency left the gold standard at some point during the Great Depression.

But the gold mining stocks did 400%+ climbs before 1934, with gold flat during a period of severe general price deflation. For a nice article on this, google "Gold Stocks in a Depression" by Jeff Clark


On Nov 02 11:58 AM chap08 wrote:

> "look at what gold stocks have done over a large variety of strong
> market disturbances - from deflation to inflation"
>
> Where is your deflation period? I hope you are not referring to Homestake
> in the 29 to 35 period. The boom in gold stocks in this period was
> due to an inflationary event, not a deflationary one. It was caused
> by the devaluation of the dollar from $20.67 to $35 on the gold standard.
> Suddenly, due to a deliberately inflationary government edict, gold
> production and reserves were worth about 70% more in dollar terms.
> This kicked off a gold mining boom that doubled production by the
> end of the 30s.
>
> None of your examples demonstrate the performance of gold stocks
> in deflation, or when gold is "steady" (for the reason I give above,
> you are totally wrong to say that gold was steady in the 30s). The
> reality is that, if we were to return to a deflationary trend, gold
> stocks would fall hard. During the deflation scare of 2008, gold
> fell by 30%. If the Fed starts raising rates and the dollar rallies,
> gold and gold stocks will fall again.