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Gold and precious metals pricing in 2009

December 30, 2008 by A.B. Dada  
Filed under Featured, Gold Investment

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Chicago, IL

By A.B. Dada

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With the 2008 year coming to a close, the popular theme on the gold and PM blogs is “where will precious metals go in 2009?”  As usual, the professional and amateur PM writers are only talking about the price of metals in dollars.  This is a very weak opinion position to promote, because it means NOTHING.

What the price of “something” is in dollars is not of primary importance to the freedom lover.  Instead, we view prices of things independently from any currency that can be manipulated.  As we’ve seen, the dollar has weakened, but so have all the other fiat currencies.  To us, we need to view what prices are in comparison to each other, as well as where we see our incomes in comparison to the items we buy.

If gold happens to get stronger against the dollar, meaning the price in dollars goes up, that means little if all our other costs go up but not in unison with a wage increase (or “raise”).  If gold goes up 20% in 2009, but oil and energy and food costs also go up 20%, what does it matter?  It’s all a loss for the individual, unless our incomes ALSO go up 20%, at which point we can say that we ended up with a wash.

For me, the most important comparisons to make are:

  1. Gold to gas ratio
  2. Gold to barrel of food goods ratio
  3. Gold to DJIA ratio
  4. Gold to (my) salary ratio
All of these ratios are important to me because they dictate if my gold holdings are staying consistent with the value of gold at which point I bought it.  When I purchase gold, I also mark down those values on that given day.  This tells me if my gold has held up against other investments and expenses.  When I see gold move extremely high versus my historical purchasing ratios, to me that ends up meaning gold is a bit overvalued and I’ll hold back on purchasing more.  If the ratios fall, meaning gold gets “cheaper” versus those other goods, I’ll buy more.  Why?  Because to me gold is NOT an investment, it is merely used to hold value in savings.
If you must get a decent analysis, albeit still in gold versus dollars, read Jon Nadler’s viewpoint on where gold may go in 2009 in his recent article at kitco, available here.

Related posts:

  1. G.U.N. Gold Financial Recap, January 6, 2009
  2. G.U.N. Gold Financial Recap, January 14, 2009
  3. G.U.N. Gold Financial Recap, January 7, 2009
  4. Gold Market Recap and News May 3, 2006
  5. Gold versus Oil Chart/Data update!
  6. G.U.N. Gold Financial Recap, January 2, 2009
  7. G.U.N. Gold Financial Recap, January 5, 2009
  8. Buying Power of Gold versus Barrel of Goods chart
  9. The DJIA, NASDAQ, price of gold and silver: they don’t matter
  10. Feb 02, 06: Gold Market Close

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