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Can gold outpace monetary inflation?



December 28, 2011 – Comments (7)

Negative real rates are driving gold higher.  The real cause is monetary inflation.  More dollars, same amount of gold, = higher price of gold.  You could probably say the same for many different commodities.


So, how can you make a killing off of gold?  Your gains in gold should theoretically be erased by the stealing of your money through money printing.


So, I have to conclude, the only way to actualyl gain wealth off of gold is 1) our economy is so productive that the price deflation helps offset monetary inflation (lol)

2) the only argument left is that the price is being heavily manipulated downward.


So, if only #2 can explain how to get rich and not merely ward off do you come up with the target price for gold?  Gold will always go up in price (I think) because money will always be printed.   So I cant ever be too bearish on it.  But wheres the 'top'?  When does it get more expensive than the manipulation?  do you simply divide outstanding dollars by outstanding gold (which would put gold at like 10k/oz). 


What other manipulation is keeping the price down?

7 Comments – Post Your Own

#1) On December 28, 2011 at 5:19 PM, selfdestruct2 (34.99) wrote:

Many believe it's eventually going to that level.

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#2) On December 28, 2011 at 7:46 PM, JakilaTheHun (99.91) wrote:

We don't have negative real interest rates.  Once you factor in deflationary trends in fixed asset prices, particularly housing, we actually have very positive real interest rates.

And gold prices have been on a downtrend since September, so I'm not sure how it's "driving gold higher". 

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#3) On December 28, 2011 at 8:47 PM, Valyooo (34.65) wrote:

10 years > 3 months

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#4) On December 29, 2011 at 4:03 AM, DarthMaul09 (29.02) wrote:

Many investors still have FAITH in the US dollar, relative to other major currencies, which will keep gold and other commodities under control.

I doubt that the FED has lost its fear of deflation, especially in an election year, so some form of market raising intervention is likely to be tried.  The trick will be to debase the currency enough to support the market but not too much to avoid a flight into real commodities and gold.  I don't think that the FED wants to see a repeat of the price action of the metals that followed QE2.

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#5) On January 01, 2012 at 11:57 PM, Melaschasm (< 20) wrote:

At todays prices, I think gold is mostly an inflation/disaster hedge.

However, with the probability of two billion people gaining enough wealth to buy gold jewelry over the coming decade, there is a potential increase in demand for gold.

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#6) On January 03, 2012 at 3:25 AM, walt373 (99.88) wrote:

People still believe in hyperinflation?...

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#7) On January 03, 2012 at 4:15 AM, AfoolwondersNot (< 20) wrote:

I don't know how many people "still believe in hyperinflation" but I do have eyes and what I see at the grocery store is more real than any theoretical arguement.

The animal may not be hyper right now but it sure appears to at least have a mild to full blown form of ADHD.

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