Gold's Real Inflation Adjusted High Is $7,150/oz

Includes: GLD, SLV
by: GoldCore

Gold is trading at $1.063/oz this morning and traded between $1,048/oz and $1,066/oz over the last 24 hrs. In EUR and GBP terms, gold is trading at €710/oz and £648/oz respectively. Gold continues to gradually eke out gains and consolidate at near record levels on continuing oil strength and dollar weakness. Buying of physical remains robust on all price dips and this bodes well for further record highs in the short term.

Most analysts have been wrong and bearish on gold in recent weeks, months and years and the predictions made by more bullish analysts that gold would reach its inflation adjusted high of over $2,300/oz were far from the consensus. But there is a gradual realization among some analysts that we are living in unprecedented financial and economic times and quantitative easing, near zero percent interest rates and the explosion of public debt on western governments’ balance sheets all mean that gold is very likely to reach its inflation adjusted high of 30 years ago at over $2,300/oz.

SS CPI Adjusted Gold Price vs Government Adjusted Gold Price

Indeed Bloomberg reports today that were the more accurate methodology of measuring inflation used in 1980 used today, then the real gold price high in 1980 would be $7,150/oz. The increasingly respected John Williams, an economist and the editor of told Bloomberg that the government has understated the cost of living over the past two decades with adjustments (hedonic adjustments etc.) in the way it measures the basket of goods and services monitored by the US consumer price index, or CPI.

Annual Consumer Inflation

Silver is currently trading at $17.70/oz, €11.84/oz and £10.80/oz. Silver rose to a recent nominal high $20.88/oz in March 2008. After an 18 month period of correction and consolidation, silver looks set to challenge that high in the coming weeks. We continue to be bullish on gold and particularly silver and believe that silver will likely surpass its non inflation adjusted high of $48.70 per ounce and its inflation adjusted high of some $130 per ounce in the coming years and probably sooner than even more bullish analysts expect.

Platinum Group Metals
Platinum is trading at $1,371/oz and rhodium is trading at $1,750/oz. Palladium is currently trading at $337/oz.

Disclosure: no positions