Gold is on a 10 year winning streak. It was $300 per ounce in 2000 and is $1,335 today. The question everyone is asking is how high will gold go?
No one knows for sure, but one reference point is the 1980 high of $850 an ounce. Obviously you have to adjust that for 30 years of inflation, but Doug Casey points to a reason the inflation adjustment is much larger than most people think.
The government’s formula for measuring inflation changed in 1993. The change had the effect of – surprise! – lowering inflation numbers. Shadowstats.com uses the government’s pre-1993 inflation formula, which produces much higher inflation numbers than what’s coming out of the Bureau of Labor Statistics using the post-1993 formula.
Why would the government want to understate inflation? Many government contracts, wages, and benefits have an annual cost of living adjustment, which is based on the BLS’s official inflation numbers.
Example. Thanks to an official inflation rate of effectively zero percent Social Security will have no cost of living adjustment for the second year in a row. In contrast, Shadowstats shows an inflation rate this year of almost 6% and argues that Social Security payments should be almost double their current levels based on the pre-1993 formula.
So, going back to gold, how high would gold need to go to equal its 1980 high? Doug Casey:
There are lots of numbers out there from people making different projections. If you think of a manic peak similar to that of 1980, you get an inflation-adjusted figure of $2250, just to match that peak. If you use John Williams’ Shadow Government statistics, which I believe are much more accurate, you get a number over $3500.
And of course in 1980 the Federal Reserve wasn’t printing trillions of dollars in new money. It isn’t hard to believe gold could go higher this time.
- Zimbabwe’s 2008 Inflation was 6 Quinquatrigintillion 500 Quattuortrigintillion %, or 1 Googol 65 million %
- Gold margins raised, silver margins raised twice in one week
- Silver hits $25 last week, then $26, $27 yesterday and $28 this morning
- Silver, Y’all