Gold Prices in Constant Dollars

13 Aug

Gold Prices in Constant Dollars

Gold has reached new highs in nominal terms but it’s still below its inflation-adjusted record

How can you compare today’s gold and silver prices with their prices years ago?

It is not as easy as comparing today’s price with the price on any given day in the past.  The reason why goes right to the root of many of our financial problems.  It is because the measuring unit, the US dollar, is inconstant.   It is like a yardstick on a rubber band.  It is like the butcher’s thumb on the scale.  Such measurements are unreliable.

Last week we wrote about this problem in comparing today’s silver price with silver’s past performance.  

Saying that silver is headed to about $50 where it was in 1980 and in 2011 does not provide a clear picture, thanks to the incredible shrinking purchasing power of the dollar.  It would take $153 dollars today to equal the purchasing power of $50 in 1980.  So, today silver would have to reach $153 to equal its 1980 high. 

Similarly, silver would have to rise to $57 today to equal the high of $50 it touched in 2011.  That is because the US dollar is losing value all the time.

Let us apply the same “constant dollar” analysis to the price of gold.

Gold would need to rise to $2,850 in today’s dollars to equal its 1980 high of $850.  In 2011 gold came close to $1,900.  In todays dollars, the would be the equivalent of $2,222.

The Word Gold Council has provided us a chart of that shows the history of the gold price in both nominal dollars (the grey line) and in constant dollars (the green line).

If we were on a gold standard today, the gold dollar would be a reliable unit of value.  In fact, the dollar would be exactly what they used to say about it, “as good as gold.”  It would be a safe way to store wealth, not just for a short period, but for generations.  There would be no guessing games about foreign exchange rates with other countries on a gold standard. The dollar wouldn’t have to be “managed,” that is manipulated in a way that favors the crony banks that created to Federal Reserve to do that managing kfor them.  

A return to gold would do a lot to restore honestly in public life and civility in society.  That’s because it’s been said that the gold standard is like a country where a man’s word is his bond; fiat money systems are like a country where no one tells the truth.

A return to gold would increase our prosperity, too.  But all that is too much to take on in the present age, with its social, legal, and monetary breakdown.  

The best you can do is seek to protect yourself and profit as the monetary breakdown proceeds all around us.  A Republic Monetary Exchange professional can help you with that.