Most Recent News

Darkest before the boom

During my late Summer writing hiatus, many were perplexed with the huge “fall” in the dollar price of gold. Looking at the gold versus barrel of goods chart over the past few months, we see that gold is down in dollar value about US$100 in 5 months. In that same time frame, the DJIA is up about 5%, silver is way down, and oil has plummeted the most. The graph doesn’t plot median housing prices, but I’m considering adding it.

So why has gold fallen? Gold is an excellent hedge against inflation, but it is not perfect. It responds to inflation slowly — with peaks and valleys and sometimes huge gains and drops. The investor market really is not healthy for gold, it is the long term holders that really keep gold in the spotlight in terms of history: because the supply of gold over time doesn’t increase as quickly as the supply of anything else (housing, paper dollars, big screen TVs, drugs, prostitutes, education, medication, food, etc), the value of gold versus the other goods tends to go up over time. But what about during the short run? We don’t live forever, and gold hasn’t been very glorious during most of our lifetime.

Read this entire article at the gold investing site.