Gold vs Inflation


Gold has rallied as much as 618% from its low in August 1999 to August 2011.
Gold price in August 2011, is breaking even with Gold Inflation Adjusted in December 1980.
Gold real value from 1980 has been reduced to almost nothing but inflation.
Gold can not pass the resistance at 1800 Inflation Adjusted Level
To assess the effect of inflation, see below the Gold nominal price and Gold inflation adjusted price chart from 1980.
                         | Inflation Rate |

Gold inflation adjusted chart - end of month April 2013




Investors who bought Gold in year 1979 are breaking even with inflation adjusted price from 1979.
They had to wait 30 years for this moment.
Many people believe that Gold is good investment. So far they were right. Short term Gold has rallied as much as 618% in the last 10 years.
In low interest rate environment the cost of holding Gold positions in the Market is small.

In high interest rate environment, the cost of holding Gold positions in the Market is rising and investors may start thinking why not selling Gold, deposit money and collecting high interest.

The chart below - US 3 months Bill Rate yield, shows that in 1979 as interest rate got above 8 % P.A. Gold bubble begin to deflate See chart above.
Would the history of 1979 Gold bubble repeat?



Small percentage of people may still holding Gold because they simply believe Gold is a good investment, but the risk is that they could wait another 30 years
to break even with Gold real value or Gold price inflation adjusted.

A Million dollar question. How long Federal Reserve can maintain this low interest rate environment?                                  | US Interest Rate |



Gold Nominal Historical chart - end of month April 2013






Gold Nominal chart - end of month April 2013




 
Gold Nominal - Logarithmic chart end of month April 2013




 


Gold all time high inflation adjusted chart - end of month April 2013






Gold inflation adjusted Long Term Historical chart - end of month April 2013




Gold Nominal - Long Term Historical Logarithmic chart - end of month April 2013




Gold inflation adjusted Long Term Logarithmic Historical chart - end of month April 2013