Originally Posted by UneasyRider
It's interesting to see silver and gold go so high after all of the PM debates that have gone on here. We are going to tank some day soon and when we do those PM's will keep going up. FerFal said that people in his country sold gold at $4,000 thinking that they had made a killing, but the currency that they put their profits in just kept inflating to 100 to 1 type numbers.
Hang on to your PM's.
The price of Gold has had almost no correlation with inflation for the last 32 years according to a study by Ibbotson. Take Gold's high point in 1985 at $850 an ounce and today it would have to be worth over $2,200 an ounce to just keep up with inflation. Forget the high point--take the average price of the 80's and the metal still hasn't kept pace with inflation Over the last three years the price of Gold has gone up dramatically. Yet inflation has been below 2% for most of that time.
The price of Gold is reasonably correlated with the value of the dollar on the world's currency markets. Since it seems clear that the current administration is going to pursue a weak dollar strategy to help prop up manufacturing its not unreasonable to use Gold as a hedge.