…[I]nvestors and analysts continue to point to events such as Fed money creation, interest rates, recession, weak economy, civil unrest, a contentious national election, etc. as justification for their expectations about the price of gold…[but] none of these things have any bearing on gold’s price – none. [Let me explain why that is the case.]
Gold’s Triple Tops
In the chart above you can see that there are three distinct periods of rising gold prices.
- The first two periods were each a decade in length: 1970-80 and 2000-2011 and both of those periods were preceded by longer periods of time – forty years and twenty years – during which gold’s price was not increasing.
- The third period was shorter in length and lasted five years from January 2016 to August 2020. It was preceded by a decade of declining gold prices.
- The chart shows that the triple top is still intact. The price at which gold peaked last August is just shy of Its peak in 2011; and before that, in 1980.
- The stopping points in the chart are the points where equilibrium was reached regarding a gold price which reflects the dollar’s cumulative loss in purchasing power up to that point…
- Peak No. 1: The average monthly price for gold in February 1980 (the month after its intraday peak of $848) was $664 and is shown on the chart. That price represents an approximate 97 percent (97%) cumulative loss in U.S. dollar purchasing power that had taken place by that time.
- Peak No. 2: Forty-one years later, in August 2011, the average monthly price peaked at $1825 (intraday high of $1895) and is indicative of a cumulative loss in U.S. dollar purchasing power close to 99 percent (99%).
- Peak No. 3: When gold’s average monthly price hit a new peak of $1971 in July 2020, followed by an intraday high of $2058 the next month, its price reflected a full 99 percent (99%) cumulative loss in U.S. dollar purchasing power since the Federal Reserve began ‘managing’ our money.
The corresponding inflation-adjusted prices for the three peaks are $2248/ozt. in 1980; $2151 in 2011; and $2032 ozt. in 2020.
…What are the implications for those expecting higher gold prices now and in the future?
The successive inflation-adjusted peaks in 2011 and 2020 were slightly short of the 1980 peak. Further rises in gold’s price on an inflation-adjusted basis can be expected to stop at the same approximate points…because gold’s value is constant and unchanging.
- One [troy] ounce of gold today has the same value that it did in 2011 or 1980 or 1920; and the value of one [troy] ounce of gold in the future won’t be any different, either.
- Gold’s price, on the other hand, can continue to rise over time as the U.S. dollar continues to decline [as its]…price does not tell us anything about gold. It only tells us what has happened to the U.S. dollar.
- Increases in the price of gold come “after the fact”. Gold’s price action is not anticipatory of future conditions, events.
- Gold’s higher price over time reflects the actual the loss in purchasing power of the U.S. dollar. The point of origin is fixed convertibility at $20.67 oz. when paper dollars could be exchanged for gold at that fixed price.
Since the only reason for a higher gold price is a further decline in the U.S. dollar, then the price of gold cannot be expected to rise further to any meaningful degree until after the dollar has lost additional purchasing power.
As of this point in time, any price for gold close to $2,000 represents a ninety-nine percent [99%] loss in purchasing power of the U.S. dollar which brings us back to our opening statement that gold is fully priced at $2,000 per troy ounce.
Editor’s Note: The original article has been edited ([ ]) and abridged (…) above for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor. Also note that this complete paragraph must be included in any re-posting to avoid copyright infringement.
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