Determining the True Inflation-Adjusted Gold Price

A new NBER working paper, “The Golden Dilemma”, looks at the investment history — and possible investment future — of gold. Many fascinating nuggets and charts in the research.

Inflation adjusted silver prices are more difficult to calculate due to silver’s volatility. However, knowing the true inflation adjusted gold price ($3604.22) and estimating the gold/silver ratio allows a reasonable estimate. The gold/silver ratio fluctuates wildly from a high of 137 to a low of 15.

By John Dowdee:Gold bullion has had an illustrious and volatile past. In 1934, a year after the U.S. went off the gold standard, the price of gold was pegged by the Government at $35 per ounce. It stayed at this value until 1971 when President Nixon allowed the value to float. And float it did, hitting a high of $850 an ounce in 1980. It subsequently collapsed to $250 an ounce in late 1980s and stayed in a relatively narrow trading range for the next decade.

By Tim Iacono: The Federal Reserve sparked a huge rally in precious metals markets on Wednesday when it forecast super-low interest rates for the next three years and hinted at more money printing to come; the gold price surged more than $50 an ounce within about an hour and silver jumping almost $2 an ounce.

With gold a stone’s throw away from $2,000 and already up 27% on the year, the objective investor might begin wondering how much higher both it and silver can climb. After all, gold is nearing its inflation-adjusted 1980 high – and that peak was a spike that lasted only one day. So, how much return can we realistically expect in each metal at this point? And is one a better buy than the other? There are dozens of ways to calculate price projections, but I’m going to use data based strictly on past price behavior from the 1970s bull market.

Via Gordon T. Long of GordonTLong.com, One of the first axioms of analysis is: "Garbage In, Garbage Out"! If your data is flawed, everything you do with it and the decisions stemming from it are flawed and dangerous to your financial health. Experienced analysts will often be found relentlessly checking, rechecking and validating their inputs and assumptions.

The world's central banks have gold bulls on high alert thanks to unprecedented, ultra-easy monetary policy. Eric King of King World News asked Michael Pento if this means gold $10,000 is coming. Here's Pento's response:

By Epsilon:Gold and silver appear to be making their long-awaited comeback from their Q4 2011 fall. But do they have enough left in the tank to continue toward, and possibly surpass, their respective all-time highs? Let's take a look.Many believe that the price of gold and silver increases, historically. These charts, from Kitco.com, show this seemingly obvious long-term uptrend on a 10-year time frame: (click images to enlarge)