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XMFSinchiruna (26.55)

John Williams of Shadowstats: $7,150 is the inflation-adjusted equivalent to gold's 1980 peak.



October 21, 2009 – Comments (8)

I missed this little gem during my first read-through. I'm glad Iopened the article for a second look.

“If the methodologies of measuring inflation in 1980 had been kept intact, gold would have to hit $7,150 to be the equivalent of the 1980 record,” Williams said. 

Gold would need to rise more than sixfold to top the 1980 record, using a more accurate inflation-adjustment, said John Williams, an economist and the editor of Berkeley, California- based He said the government has understated the cost of living over the past two decades with adjustments in the way it measures the basket of goods and services monitored by the U.S. consumer price index, or CPI. 


How nutty is my $2,000 target looking now? ;)

I'll remind Fools that back in 2006, when gold traded around $500-$650 or so, my calls for $2,000 gold were routinely met with incredulous consternation. I suppose one reason I gravitated to the Motley Fool at the time had to do with the fact that everywhere else I espoused my views, they were met with even greater skepticism to the point of ridicule. Here, although few agreed, at least I found an open-minded community of investors willing to discuss the prediction on its merits without dismissing it out of hand.

I know we've yet to reach the $2,000 mark, but it's so in the bag. The Churchill Downs of currency races has begun, and I'm afraid the dollar has suffered a broken ankle right out of the gate.


Volaitility is a given, and will only increase as the bull market for precious metals proceeds, but it's still not to late to seek protection from the dollar with gold and (especially) silver.


8 Comments – Post Your Own

#1) On October 21, 2009 at 11:02 AM, miteycasey (28.88) wrote:

In 1980 inflation was ~15%.

Today it's <5%.

Until inflation hits gold will be a bad investment. 

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#2) On October 21, 2009 at 11:13 AM, silverminer (30.06) wrote:


ugh, grunt, sigh.

By the time inflation hits in earnest gold will have already appreciated considerably from today's levels. It seems you may be failing to consider the devaluation of our currency as a second inflationary input.

People, please understand, those who fail to see dollar devaluation as the principle source of inflation are in for a rude awakening. The looming stagflationary event is a currency phenomenon, pure and simple. Waiting for the "velocity of money" to speed up before recognizing the inflationary environment at hand is the fastest road I can conceive to financial hardship.

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#3) On October 21, 2009 at 11:34 PM, jesusfreakinco (28.13) wrote:


I saw that John Williams article too.

Great minds think alike...

Post 1 -

USD: The race to debase

Post 2 -

Hold the line at 75... USD on the rocks again...

PPT did a nice job of bringing the USD back above 75 at the close of the US session.  We'll see what happens in the coming days.  I fear for what might be coming...


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#4) On October 22, 2009 at 7:37 AM, silverminer (30.06) wrote:


Agreed, 75 just became the key tipping point. 76 remains the technical support line of note, having only fallen fairly recently. It bounced off 75 overnight, and now will try to regain the 76 line. If that happens, then I expect a small manufactured rally to be inserted behind the move ... perhaps to 78? Best case and most likely scenaio for the dollar I'm afraid is just a mini-rally back to touch 80 as stocks begin their descent. In this scenario, gold could go back to test $1,000.

It all makes no difference to me at this stage. I'm invested long and staying that way. I raised a little cash recently to press on such a dip, but otherwise took very little in the way of profits.

I remain about 80% precious metals, 10% energy, and now 10% cash.

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#5) On October 22, 2009 at 8:44 AM, catoismymotor (< 20) wrote:


When using a similar approach to silver where should it be when compared to gold at $7,100 per ounce? $100 an ounce?

As always I appreciate your input.


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#6) On October 22, 2009 at 9:31 AM, silverminer (30.06) wrote:


Oh no ... the silver equivalent if gold were to ever reach $7,000 would be more along the lines of $350, as the ratio under those circumstances would tend towards its historic mean of 20:1 (it's actually more like 16:1 over the very long-term).

No ... $100 is within my radar for silver in a way that $7,000 gold is not.

At $2,000 gold, which is the conservative estimate I have been targeting for three years now, I expect silver at $50. From there, I would expect further advances in gold to bring the ratio towards the mean, and would expect $100 silver before we would reach $3,000 gold.

Please be clear, I am not saying that gold will reach $7,000, nor $5,000 ... I have no idea how high it can go because past a certain degree of currency deterioration the global balance of power comes into serious flux and raises the likelihood of factors coming into play that are extremely difficult to forecast. I stop where my vision does, and my vision so far only leads me to $2,000. I continually reassess, and may adjust my target higher as we approach.


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#7) On October 23, 2009 at 2:35 AM, mgiv (39.55) wrote:

it's just metal.

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#8) On October 26, 2009 at 5:42 PM, USNHR (29.92) wrote:

While bulls say gold is cheap, the inflation-adjusted price is 15 percent above its 30-year average, Bloomberg data show.

“These wild calls for several-thousand-dollar gold are typical of times when gold goes into uncharted territory,” Nadler said. “The Fed will pull the interest-rate trigger and the Obama administration will, in addition, pull the tax-hike trigger before we get into any serious inflation. Once the man on the street gets in, the gold rally is likely over.”


Quotes above out of the same article. If I went into gold now, I could buy about two ounces, and with my luck it would fall to $500. I think I'll sit out on the Gold Rally as I may be the man on the street they are referring to above.

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