Real Price of Gold Since 1791

[MachineGhost]

[MachineGhost]

But on the other hand...

[dragoncar]

So the moral of the story is... don't trust charts?

[Ad Orientem]

So the moral of the story is... don't trust charts?

+1

[MachineGhost]

On the 1980 CPI adjustment chart, it seems that we've retraced more than 50% of the bull market, which doesn't bold well for a post-1975-76 style resumption.  Given that the PP is now approaching almost 3 years of being underwater, gold is really killing its performance.

[Stewardship]

Over the LONG term, I expect the real return of gold to be zero.

In a world of ever-increasing financial intangibility and government imposition, I tend to expect otherwise.

[Stewardship]

To make sure we're speaking the same language, let's look at one example:
Today you can buy a brand new 2014 Nissan Versa for about 10 Gold Eagles (you'll need to sell the Eagles first, but you get the idea).  Do you forsee a day when gold will rise in value while other goods (such as cars) will rise less, such that you can buy an equivalent car for, say, 5 gold Eagles?

Yes.  Gold becomes more valuable compared to other goods, including cars, in an increasingly totalitarian, power-central, and monetary-complex world.

"The desire of gold is not for gold. It is for the means of freedom."
-- Ralph Waldo Emerson

[Stewardship]

To make sure we're speaking the same language, let's look at one example:
Today you can buy a brand new 2014 Nissan Versa for about 10 Gold Eagles (you'll need to sell the Eagles first, but you get the idea).  Do you forsee a day when gold will rise in value while other goods (such as cars) will rise less, such that you can buy an equivalent car for, say, 5 gold Eagles?

Yes.  Gold becomes more valuable compared to other goods, including cars, in an increasingly totalitarian, power-central, and monetary-complex world.

Would you have said the same thing in 1999 (refer to MG's real gold price chart above)?  At that point, gold had fallen precipitously for 2 decades.  And you remember who was POTUS at that point. 

My view is that future gold prices are unpredictable.  My own guess is that nominal prices will fall below $1000 and fluctuate around that level for another decade.  But of course my guess is useless to everyone including myself, so I continue to hold my allocation to gold whether it rises or falls.  I don't expect any real return from it, but I do expect it to increase the sharpe ratio of my portfolio a bit, and most importantly to serve as an insurance policy in a real SHTF scenario.

In 1999 I would have said buy all tech stocks    But I was a teenager at the time so it was best to learn that lesson early-on.  Then in the early 2000s I read Harry Browne and bought my first gold coins.  The price was just over $300/oz.

I agree with everything you wrote there.  In the LONG term, however, I DON'T expect the real returns to be "zero" while the world is changing at an ever-increasing rate.

[Pointedstick]

I agree with everything you wrote there.  In the LONG term, however, I DON'T expect the real returns to be "zero" while the world is changing at an ever-increasing rate.

There is definitely something to be said for owning objects whose nature is ancient and unchanging when the rest of the world is constantly evolving and embracing and discarding new fashions.

Whether that means that gold's value will increase as a backlash, or fall as people succumb to the trend seems to be highly dependent on temporal events at different points in time. Ultimately, being bullish on gold's long-term prospects seems to imply bearishness for the long-term prospects for the rest of the world that's not gold.

[MachineGhost]

As PS said, if gold is in charge, it means we've got some big problems in the world.  I do like physical gold though.  It's the one
asset that has thousands of years of history behind it, and you can actually touch it.

Even though I unfortunately started buying into the PP allocation of gold near the top in hindsight, I am remarkably unconcerned about the ongoing capital losses in gold.  I couldn't say the same about stocks, bonds or even cash in an extreme enough situation.  There is just something about the certainty of knowing that real assets such as gold tassels (Vietnamese), rare stamps (Jews) or colored diamonds (Africans?) will literally save your bacon in a war-induced hyperinflation.