Gold still far from 1980 peak

Discussion in 'Economics' started by observer67, Dec 3, 2009.

  1. The gold price continues to surge but is yet to reach its all-time inflation-adjusted peak in 1980 that translates to more than $US2000 an ounce in today’s dollars, although it could reach this level if the US dollar continues to weaken.

    The price of the precious metal eclipsed $US1200/oz ounce for the first time overnight as a battered greenback elevated demand for gold, a liquid asset class that is considered a hedge against inflation or political risk.

    Gold’s previous peak was $US850 per fine ounce in February 1980, which translates into more than $US2000 when adjusted for inflation.

    Sydney-based investment research company van Eyk says scope remains for a significant rally in the nominal gold price, but there could be considerable volatility in the near term.

    Van Eyk chief executive Mark Thomas said on Wednesday that one particularly feverish commentator had predicted the gold price would hit $US5000/oz.

    More pragmatic analysts say if the US dollar continues to weaken the gold price could rise to $US2000/oz - a proposition considered extremely bullish only a few years ago when global economic conditions were buoyant.

    H3 Global Advisors portfolio manager Mat Kaleel said gold could easily go to $US3,000/oz "if conditions don’t return to normal and the US government keeps borrowing money’’, and amid expectations global gold supply would continue to decline.

    Mr Kaleel and Mr Thomas pointed to US Federal Reserve governor Ben Bernanke’s recent quote ‘‘the Fed has a printing press and will use it to combat deflation if necessary’’.

    ‘‘They more money you issue, the price of gold relative to the amount of dollars should go up,’’ Mr Kaleel said.

    ‘‘They (the US) forecast a $US1 trillion ($1.1 trillion) deficit for the next 12 or six years on top of the $US12 trillion ($13 trillion) they already owe - that’s a 50 per cent increase in the money supply.

    ‘‘Over the next five to ten years, you could pick a figure for the gold price depending on how reckless you think the central banks are going to be - put it that way.’’

    Mr Thomas said it would be prudent to hold gold as an insurance policy if the battle between the deflationary forces of the credit crunch versus the potentially highly inflationary monetary policies of most of the major economies continues.

    ‘‘Unless investors assume a return to fair weather with benign conditions in the global economy, and that the imbalances of the past decade have been resolved, van Eyk recommends continued exposure, notwithstanding the considerable volatility and currency-based fluctuations in the sector,’’ he said.

    Among key drivers for the recent price spike has been the Reserve Bank of India’s (RBI) gold-buying spree.India’s central bank in the past month has bought 200 tonnes of the precious metal from the International Monetary Fund for more than $US6.7 billion.

    ‘‘It has been calculated that the RBI (Reserve Bank of India) has made $US800 million on the investment in just three weeks,’’ Mr Thomas said.

    Mr Kaleel said the IMF was trying to sell another 200 tonnes, which could be snapped up by China and Russia.
  2. Nasdaq is far from 2000 peak, too. Time to buy? :cool:
  3. 151


    If your talking adusted for inflation, wouldn't a continually weakening dollar along with a further rise in gold offset the gain so we might never see the price as high as 1980 (adjusted for inflation)?
  4. the1


    good point. The Nasdaq will look like the $NIKK for some time to come. Gold is going through what the NIKK, NAS, and OIL went through -- they call it a bubble. But that don't mean it ain't going higher :mad:

  5. I wish I had some $ to buy Gold. I knew prices were picking when gold was less than 300.
  6. I bought some a few years back at $450 as it was breaking out for the second or third time and then bought more last year at around $900. Also bought silver at $6.50, $8.00, $15.00, and 18.00. Not to much higher on this stuff and I can pay off my mortgage.:)
  7. Anyone have any GC data, continuous contract they don't mind sharing?
  8. You also have to remember that in 1980 we were only a decade off coming off the gold standard. People started to see inflation just a few years after coming off of it so of course they got scared. Now we have been off it for 40 years so most people dont remember ever being on the gold standard. This is why gold has been going up very slowly. But People are educating themselves every day which is why gold and silver is continuing to go up every day.
  9. Ah that's why. Who was I to think it's a bunch of momentum speculators hoping to make a buck or two!
  10. During 1970 - 1980 there was real danger of USA and USSR war. So gold prices had reached its peak because of War fears.
    #10     Dec 4, 2009