Over at LRC, Michael Rozeff has a surprising analysis where he lays out a few convincing arguments that gold prices are too high right now, relative to other prices. He concludes that gold is “overvalued” and that its downward trend may very well continue.
I won’t quibble with his numerical arguments, but I think they are at best irrelevant. Investors care about forward-looking analysis, and I think forces are in place for serious price inflation over the next several years. First, Bernanke truly believes price deflation was the ultimate cause of the Great Depression, and so he will do whatever it takes to prevent it again. Second, Barney Frank and Paul Krugman are openly calling for Keynesian pump-priming to save the economy from disaster. Third, the growth in the monetary base has been absolutely jaw-dropping in recent weeks. (I provide links and a chart for these points in this blog post.)
It’s true, all of these factors could still be reversed. If Ron Paul were elected president, and Lew Rockwell were put in charge of the Federal Reserve, it would be possible that the train could be stopped, and massive price inflation could be avoided.
But with the actual people who will be in power during the next few years? I think high prices are just around the corner…
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Invest in gold now before it shoots up even more in prices
Invest in gold now before it shoots up even more in prices
If the dollar goes down in value won’t the value of gold also go down.
If it takes a double the amount of dollars to buy gold and the dollar becomes 1/2 as valuable as it formerly was will the gold buy any more than when you bought it.
Gold prices are based on dollars. A $2000 ounce of gold before double inflation will buy no more than a $4000 ounce of gold after double inflation, or vis versa.
The value of gold does not depend on the value of the dollar. Whether the dollar exists or not, gold will be easier or harder to get depending on how badly people want it as compared with other commodities. And when poeple are expecting inflation, this can drive gold prices up before the inflation even occurs.
Does anyone have any advice on where to buy gold or the best way to invest in it? I’ve been wanting to for a long time and regret not doing it sooner!
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