oldgoldbug

The New Gold Rush: Lots of Risk

Excellent article.
Given the weakness of the US economy, I agree a tightening of monetary policy is unlikely so gold will continue to grind higher. Having been there for the race up in the 70's and 80's I can assure you this time, so far, is different. Back then gold jumped up (and fell back) in huge swings. The run to $875 seemed to happen in a matter of days and after it blew off, rallies were stunted affairs. We haven't seen a blow off yet in gold. It just keeps going up.
I would guess Bernanke has had more than one conversation with Paul Volcker about what it takes to control inflation. Volcker did a masterful job of putting the genie back in the bottle, but at a high price. Long Treasuries were yielding 14% which is not a bad return, if inflation is controlled. If inflation is not controlled, then the Weimar Republic is a few steps away.
If your analysis is accurate, perhaps what the gold market is telling us is that the "zero inflation value" is going to move upward.
In any event, gold's status seems to have moved upward from "barbarous relic" to "mainstream hedge". I don't think it is in everyman's 401k yet so it probably has further to go.