Wanting to buy gold is tempting when we are told what the price should be much higher using the 1980 high and inflation taken into consideration. Average 1980 price of gold per ounce over the year was $615.00. Using the below inflation link shows gold today should be trading at 1,662.94. From 1833-1918 gold traded within the range of $18.93 in 1833 to $18.99 in 1918.A difference of only $.06 in 85 years. If we use the second 1833-1918 range high of $18.99 instead of the 1980 spike and calculate inflation we come up with $256.14 not far from the 2001 average of $271.04. Question:what is todays price of $1,256.50 based upon? inflation link http://www.bankofcanada.ca/en/rates/inflation_calc.html historical gold prices www.nma.org/pdf/gold/his_gold_prices.pdf
I think you're basing the prices on an artificial high (1980) and an artificial low (2001). Usage demands play a big role. With the massive global slowdowns, I expect lower demand and lower prices.
A lot of what you read,regarding the future price of gold should be,seems to be based on the the 1980 high and what the price should be with inflation taken into consideration.I am only questioning this type of forecasting and why the price is so high.Is the current price based on hype and fear alone?
I never thought the inflation adjusted gold prices were meaningful. There are only two meaningful measures: 1. The current marginal cost of production for a brand new gold mine from greenfields exploration to production. No commodity will stay below the cost of production for extended periods of time unless it is no longer needed or desired. I've seen various calculations of this amount that generally seem to be around $900. 2. Current supply and demand, especially demand since the additions to world supply are only about 1-2% per year. In perceived times of crisis, or when speculators jump on an uptrend, the price can go to multiples of the cost of production. Gold is unique because when demand pushes up the price, the supply can actually fall as owners of gold pull their bids because they seem the same forces pushing up the price as those who wish to buy. Gold is unique among commodities in having this quality. We seem to be in one of those time periods.
