We’ve had no shortage of headlines proclaiming “Gold Hits New Record!” When you’re in the business of writing something new every day, it’s easier to write about gold prices than to find something substantial to talk about.
Leaving the value of such reports aside, are they true? Well, recent stories announced that gold had reached US$1150 per ounce. Back in 1980, gold peaked at US$850 per ounce, which is obviously a smaller number than US$1150, but what about inflation?
This US consumer price index calculator says that US$850 in 1980 had the same buying power as US$2230 has today. So, an ounce of gold today has a little over half the buying power it had at gold’s peak in 1980. I’d say that this is a much more reasonable way to judge the price of gold, but it makes for less exciting headlines.
If we look at everything in absolute dollars, we can pump out headlines for record prices of many items every time inflation nudges up another 0.1%. Alarmist stories are great for reporters, but not much good for readers.
Wake me up if gold punches through US$2230.