Gold – Inflation – Do not fight the tape

QUESTION:

During the Panic of 1869, gold hit $162/oz on an intraday basis.

Grated this was measured in “greenbacks” rather than FRNs, but in terms of purchasing power, wouldn’t that be gold’s real all time high?

What might that be, if adjusted for subsequent inflation?  Finally, given that no one—other than Methuselah and maybe Shirley MacLaine in one of her many Earthly iterations—lives to be 144 years old and thus can wait to break even, doesn’t this fact fly in the face of the oft-stated meme that gold always holds its value?  (By the way, some very basic work I have done suggests that gold’s all time low value (as measured by purchasing power) might well have been 1999.)

Having visited many of the on-line goldbug prayer meetings, where they constantly reaffirm their unwavering faith, I sympathize with what you must face each day when you open your mailbox.

Thanks,

c

Fisk-ToastOfNY

ANSWER: You are absolutely correct. The $162 high in 1869 was by no means reached in 1980 and the 2011 high did not exceed the 1980 high adjusted for inflation. The 1999 low was the historical low. It was the black and white film Toast of New York that was shown to me in High School history class that got me into analysis and research. I was confronted by that same question. How could gold be $162 in 1869 yet $35 under Bretton Woods?  Suddenly, it was cyclical and not linear and that also meant it was NOT a hedge against inflation because it did not move steadily upward in sync. It plays catch up in bursts. The Goldbugs hate me for saying the truth. There is a time to BUY for the BURSTS and a time to SELL when it goes down because the BURST is over, To them, it has to be linear and anyone who exposes that is not the case suffers their attacks that are pointless. The joke in the office is who will assassinate me first – NSA, Bankers, or the Goldbugs?

TICTAPE

It is what it is. The oldest advice in investing – Do not fight the tape. This will be good for another round of hate mail.