Time to Admit That Gold Peaked in 2011?

[nbruno322]

Interesting article...

Time to Admit That Gold Peaked in 2011?

"According to some analysts, on an inflation-adjusted basis, gold has already matched its 1980s peak—but is that really true?"

Continued...

 

[acptulsa]

Of course it peaked in 2011. Any chart will demonstrate that there was a peak.

Of course gold will go up some more in terms of the number of FRNs it will take to buy a set amount. The same is true of everything else in all the world except used VCRs and landline telephones. It's called 'currency devaluation'.

 

[Zippyjuan]

IF you adjust for inflation, it still hasn't reached the 1980 peak which would be equal to over $2400 an ounce today. But yeah, I have been saying gold peaked a while now (while others said it would continue to rise and even possibly go to $5000 an ounce). As of this moment, gold is $1305 or 32% below its peak of $1900.

http://inflationdata.com/Inflation/images/charts/Gold/Gold_inflation_chart.htm

 

[Seraphim]

See that roughly 2 year correction between 1974-1976 (before the real blastoff)?

That is the similar correction from the last secular bull market in gold.

This time it's 2011-????

The evidence so far point towards an even longer and more powerful secular bull then that of the 1970's. I surmise that this secular bull will last more like 20-25 years as opposed to 14-15 years like the last one (yes the last one dated back towards the mid 1960's and not just 1971 with the official delinking of the dollar from gold).

This leads me to believe that this cyclical bear in the middle will be a bit longer then the last one. 3.5 years as opposed to 2 years, for example.

IF you adjust for inflation, it still hasn't reached the 1980 peak which would be equal to over $2400 an ounce today. But yeah, I have been saying gold peaked a while now (while others said it would continue to rise and even possibly go to $5000 an ounce). As of this moment, gold is $1305 or 32% below its peak of $1900.

http://inflationdata.com/Inflation/images/charts/Gold/Gold_inflation_chart.htm

 

[LibertyEagle]

I don't think anyone ever thought it was going to totally shoot up until people lost confidence in the dollar. Time will tell.

 

[Matt Collins]

If Democrats gain control of the federal government in the next two election cycles, I bet it will peak yet again.

 

[jclay2]

My PHYSICAL Gold holdings have very little to do with trading paper profits and more to do with security and protection. I bought most of my gold at 1650 and feel great about the purchase. Benefits of holding physical pms:

1. It is private wealth as no one knows about it.
2. It holds value in virtually every society in any historical age through time.
3. Because of 1/2, I have tremendous peace of mind about any oh s*** scenario.

Edit: PMs are only part of a portfolio. Diversification and investments over time are very likely to pay off in the long run.

 

[oyarde]

Interesting article...

Time to Admit That Gold Peaked in 2011?

"According to some analysts, on an inflation-adjusted basis, gold has already matched its 1980s peak—but is that really true?"

Continued...

Nah it is not 1980 , yeah , gold has leveled out , until the next economic crisis , maybe.

 

[oyarde]

My PHYSICAL Gold holdings have very little to do with trading paper profits and more to do with security and protection. I bought most of my gold at 1650 and feel great about the purchase. Benefits of holding physical pms:

1. It is private wealth as no one knows about it.
2. It holds value in virtually every society in any historical age through time.
3. Because of 1/2, I have tremendous peace of mind about any oh s*** scenario.

Edit: PMs are only part of a portfolio. Diversification and investments over time are very likely to pay off in the long run.

Paper money , is paper , when things go South, and they always do.

 

[Madison320]

I think the ratio of the monetary base to price is a good indicator.

MB is in millions of dollars:

1960 MB/Gold price = 1414
1970 MB/Gold price = 2183
1980 MB/Gold price = 195
1990 MB/Gold price = 736
2000 MB/Gold price = 2006
2010 MB/Gold price = 529

Average ratio = 1177 for these data points

Currently the MB is 3,930,646 so you would need a gold price of $3,340 to have an average MB/Gold price ratio.

So in other words gold needs to rise to $3,340 to keep catch up to all the money printing if my math is correct.

 

[Zippyjuan]

The Monetary Base (MB) is cash plus excess reserves banks have- today excess reserves is a huge percent of that number.

The price of gold should be nearly three times what it currently is because banks are not lending out money but are keeping it in excess reserves? How does that work? How do bank reserves impact the price of gold? (reserves are monies not circulating- money needs to be spent to impact prices)

And actually your own list shows that the monetary base to the price of gold is all over the place and not a reliable predictor. If it was, the ratio should be fairly consistent- not ranging from 195 to 2,183 which is a pretty huge variation. There is no correlation between the two.

 

[Madison320]

The Monetary Base (MB) is cash plus excess reserves banks have- today excess reserves is a huge percent of that number.

The price of gold should be nearly three times what it currently is because banks are not lending out money but are keeping it in excess reserves? How does that work? How do bank reserves impact the price of gold? (reserves are monies not circulating- money needs to be spent to impact prices)

And actually your own list shows that the monetary base to the price of gold is all over the place and not a reliable predictor. If it was, the ratio should be fairly consistent- not ranging from 195 to 2,183 which is a pretty huge variation. There is no correlation between the two.

I'm trying to predict the FUTURE price of gold. That's why the ratio changes. If it was always the same ratio it would be useless as a predictor!

As far as the excess reserves, again I'm trying to predict the FUTURE price of gold. Eventually that money is going to get out unless you think they fed gave the banks the money with the stipulation they NEVER spend it.

It seems to me like your predictions of gold prices are based on looking at a squiggly line and trying to guess whether it will go up or down. Am I right?

One other point. I'm not saying that the monetary base is the ONLY predictor, only that it's the most important. And the fact that the most important predictor of future gold prices has gone off the charts leads me to the easy conclusion that gold is also going way up.

 

[PRB]

that's not what all the ads are saying on the radio!!!!

 

[mrsat_98]

Realistically we should be discussing the dollar as it bounces down there stairs to worthlessness.

 

[Zippyjuan]

I'm trying to predict the FUTURE price of gold. That's why the ratio changes. If it was always the same ratio it would be useless as a predictor!

As far as the excess reserves, again I'm trying to predict the FUTURE price of gold. Eventually that money is going to get out unless you think they fed gave the banks the money with the stipulation they NEVER spend it.

It seems to me like your predictions of gold prices are based on looking at a squiggly line and trying to guess whether it will go up or down. Am I right?

One other point. I'm not saying that the monetary base is the ONLY predictor, only that it's the most important. And the fact that the most important predictor of future gold prices has gone off the charts leads me to the easy conclusion that gold is also going way up.

If you can't use it to predict prices in the past, it likely won't be useful to predict prices into the future. If the ratio changes all of the time, it is impossible to say what it could or should be in the future.

You are right that the monetary base COULD possibly lead to higher prices on things including gold in the future, but how much depends on how quickly it is released. If reserves trickle down over a long period of time, the amount of circulating money will only slowly increase and have limited impact on prices while if it was all released and spent at once, it would have a dramatic impact on prices. So even knowing the size of the base still makes it difficult to predict any prices of anything in the future.

It seems to me like your predictions of gold prices are based on looking at a squiggly line and trying to guess whether it will go up or down. Am I right?

Isn't that what you are trying to do by looking at a monetary base chart?

From 1980 to 2004, the monetary base was rising. What was the price of gold doing those 20+ years? Falling. The base has nearly always been rising in fact. Has the price of gold always been rising? I don't think so.

The price of gold really is most closely related to economic confidence. It rose in the 1970's to 1980 because inflation was rising. Once inflation started heading down, the price of gold did as well. It soared again with the economic collapse of 2007 and as it eased, the price again started to head down.

 

[Madison320]

1960 MB/Gold price = 1414
1970 MB/Gold price = 2183
1980 MB/Gold price = 195
1990 MB/Gold price = 736
2000 MB/Gold price = 2006
2010 MB/Gold price = 529

Average ratio = 1177 for these data points

Zippy, you made me realize something. Lets look at those numbers and see if they were actually a good predictor.

1970 - MB/Gold ratio was 2183 which is double the average. The price of gold skyrocketed in the 1970s. Check.
1980 - MB/Gold ratio was 195 which is way below average. The price of gold dropped like a rock in the 1980s. Check.
1990 - MB/Gold ration was 736, which is slightly below average. The price of gold dropped slightly in the 1990s. Check.
2000 - MB/Gold ratio was 2006, which is double the average. The price of gold more than doubled in the 2000s. Check.
2010 - MB/Gold ratio was 529, which is somewhat below average and the price of gold fell. Check.
2014 - MB/Gold ration is 3024 which is TRIPLE the average and STILL climbing rapidly. What do you THINK is going to happen to the price of gold? Check Mate!!

 

[Zippyjuan]

The ratio changed BECAUSE the price of gold changed. But what about the monetary base which is the premise here? The monetary base was increasing the entire time which is what you were trying to say was the true indicator of future gold prices- even when the price of gold was falling. Which still says nothing about what the "true" ratio should be or what the price of gold ought to be in the future.

 

[Madison320]

If you can't use it to predict prices in the past, it likely won't be useful to predict prices into the future. If the ratio changes all of the time, it is impossible to say what it could or should be in the future.

I was going to reply to all the other stuff but if you don't understand this, the rest is useless.

If the ration of A to B remains constant, that ratio is useless as a predictor. Don't you understand that?

 

[Madison320]

The ratio changed BECAUSE the price of gold changed. But what about the monetary base which is the premise here? The monetary base was increasing the entire time which is what you were trying to say was the true indicator of future gold prices- even when the price of gold was falling. Which still says nothing about what the "true" ratio should be or what the price of gold ought to be in the future.

Huh? I give up.

 

[Zippyjuan]

I was going to reply to all the other stuff but if you don't understand this, the rest is useless.

If the ration of A to B remains constant, that ratio is useless as a predictor. Don't you understand that?

If the ratio of the price of apples to bananas has been two to one and the price of a banana goes from a dollar to two dollars, then you can expect the price of an apple to probably go to $4. If I can get four apples for one banana one week and seven apples for a banana the next week and one apple for five bananas the week after that, we can't look at what the price of an apple is and guess how much a banana will be because there is no fixed price ratio.

If you are saying that because the price of apples went up, (the monetary base) we know how much bananas should be (gold) you can't. In your list it was sometimes 200 to one, sometimes 2000 to one. They did not move together at all. That means that the "proper" price for gold could be anywhere between $600 an ounce and $6000 an ounce. And nobody can say for certain where along that span it should be.

If one banana was one apple and the price of apples doubled and bananas did too, the ratios stays the same. In this case, we can guess what apples will sell for if we know what happened to bananas because the ratio of prices stayed the same. IF apples were $1 and bananas $1, if the price of apples went to $2 then the price of bananas will probably go to $2 if the ratio stays consistant.

Or let's go even simpler. If the monetary base can predict the price of gold, then when the monetary base increases, the price of gold should increase. Since at least 1970 (actually since 1913 when it started being measured), the monetary base has been increasing nearly every year. Has the price of gold increased nearly every year since then?