Are we approaching a peak in the price of gold?
According to several mainstream economists, we are indeed.
But, they’re DEAD wrong and today I’ll show you why.
See, their argument relies on the inflation-adjusted price of gold.
In January of 1980, the price of gold reached a local peak near $850 per ounce.
According to official U.S. inflation statistics, $850 in January of 1980 would be equivalent to $3,504 today.
In the 45 years since then, gold has increased in value by nearly 300% to $3,346. That’s getting close to the “official” inflation-adjusted 1980 price of $3,504. So are we nearing an inflation-adjusted “peak gold” price?
Nope. In today’s letter, we’ll debunk this common claim.
But first, let’s set a foundation for our argument.
Since 1980 America’s monetary base has increased from $156 billion to more than $5.7 trillion. That’s a 3,533% increase.
Additionally, in 1980 the U.S. government had about $845 billion in debt. Today it’s over $36 trillion, a whopping 4,160% higher.
Furthermore, in 1980 America’s debt-to-GDP ratio was around 35%. Today it’s 124%.
So no, we aren’t approaching a peak in the price of gold. Not even close.
Bogus Inflation Stats
Anyone who has studied the way official inflation is calculated knows it’s suspicious (at best).
As an example, the average car in America in 1980 cost about $7,200. In 2023 that number increased to $48,000, an increase of 566%.
But according to the Bureau of Labor Statistics, the official source of inflation data in the U.S., the price of a car has only increased about 100% since 1980.
Hmmm, the price has increased 566% but the BLS says it has only doubled. What explains the difference?
Welcome to the wonderful world of “hedonic adjustments”. Because car technology has improved over time, the BLS says we aren’t actually paying 566% more for our cars. It’s a better product, so they say we are effectively only paying 100% more.
Despite the fact that the price of an average car has increased 566%, because it’s a better product (on paper), the BLS cooks the books and pretends things are cheaper than they actually are.
This is the twisted world of inflation statistics. Governments always attempt to downplay inflation. To acknowledge reality would be admitting wrongdoing, and most governments will have no part of that.
Based on this, we can safely say that the official inflation-adjusted 1980 high in gold of $3,504 is also bogus. As we discussed in Silver’s 3x Upside, the true inflation-adjusted high of gold may be $13,000 or more.
An Ongoing Disaster
When gold haters try to call a top, they often act as if our country’s financial situation has stabilized.
Sure, we had a little bout of inflation, but it’s all over now and everything’s fine.
Wrong. America’s debt and deficits are soaring higher. This is despite a booming stock market and relatively low unemployment. When the next recession hits, deficits could easily double.
And disturbingly, the American consumer is close to being tapped out. When the multi-decade spending spree ends, the economy will collapse like a house of cards. Money will be printed at unprecedented levels and stimulus checks will flow like a whitewater rapid.
Over the medium term, we might even see Universal Basic Income (UBI) rolled out in America. AI is set to disrupt the white collar workforce, and there’s a good chance that eventually some sort of UBI is attempted. Of course, this would only worsen the situation. More money printing, less economic incentives. But that doesn’t mean politicians won’t try it.
Over the longer run, AI is going to do wonders for world productivity. And the market will find new ways to keep the workforce busy. But first we have to experience the disruption period, which is going to add additional chaos to an already volatile era.
So no, now is not a time to take profits in gold and silver. It’s time to load up on the dips, if you’re able. This trend is just picking up speed.
