Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
RAMPANT MONEY PRINTING INFLATION BIG PICTURE! - 16th Jun 21
The Federal Reserve and Inflation - 16th Jun 21
Inflation Soars 5%! Will Gold Skyrocket? - 16th Jun 21
Stock Market Sentiment Speaks: Inflation Is For Fools - 16th Jun 21
Four News Events That Could Drive Gold Bullion Demand - 16th Jun 21
5 ways that crypto is changing the face of online casinos - 16th Jun 21
Transitory Inflation Debate - 15th Jun 21
USDX: The Cleanest Shirt Among the Dirty Laundry - 15th Jun 21
Inflation and Stock Market SPX Record Highs. PPI, FOMC Meeting in Focus - 15th Jun 21
Stock Market SPX 4310 Right Around the Corner! - 15th Jun 21
AI Stocks Strength vs Weakness - Why Selling Google or Facebook is a Big Mistake! - 14th Jun 21
The Bitcoin Crime Wave Hits - 14th Jun 21
Gold Time for Consolidation and Lower Volatility - 14th Jun 21
More Banks & Investors Are NOT Believing Fed Propaganda - 14th Jun 21
Market Inflation Bets – Squaring or Not - 14th Jun 21
Is Gold Really an Inflation Hedge? - 14th Jun 21
The FED Holds the Market. How Long Will It Last? - 14th Jun 21
Coinbase vs Binance for Bitcoin, Ethereum Crypto Trading & Investing During Bear Market 2021 - 11th Jun 21
Gold Price $4000 – Insurance, A Hedge, An Investment - 11th Jun 21
What Drives Gold Prices? (Don't Say "the Fed!") - 11th Jun 21
Why You Need to Buy and Hold Gold Now - 11th Jun 21
Big Pharma Is Back! Biotech Skyrockets On Biogen’s New Alzheimer Drug Approval - 11th Jun 21
Top 5 AI Tech Stocks Trend Analysis, Buying Levels, Ratings and Valuations - 10th Jun 21
Gold’s Inflation Utility - 10th Jun 21
The Fuel Of The Future That’s 9 Times More Efficient Than Lithium - 10th Jun 21
Challenges facing the law industry in 2021 - 10th Jun 21
SELL USDT Tether Before Ponzi Scheme Implodes Triggering 90% Bitcoin CRASH in Cryptos Lehman Bros - 9th Jun 21
Stock Market Sentiment Speaks: Prepare For Volatility - 9th Jun 21
Gold Mining Stocks: Which Door Will Investors Choose? - 9th Jun 21
Fed ‘Taper’ Talk Is Back: Will a Tantrum Follow? - 9th Jun 21
Scientists Discover New Renewable Fuel 3 Times More Powerful Than Gasoline - 9th Jun 21
How do I Choose an Online Trading Broker? - 9th Jun 21
Fed’s Tools are Broken - 8th Jun 21
Stock Market Approaching an Intermediate peak! - 8th Jun 21
Could This Household Chemical Become The Superfuel Of The Future? - 8th Jun 21
The Return of Inflation. Can Gold Withstand the Dark Side? - 7th Jun 21
Why "Trouble is Brewing" for the U.S. Housing Market - 7th Jun 21
Stock Market Volatility Crash Course (VIX vs VVIX) – Learn How to Profit From Volatility - 7th Jun 21
Computer Vision Is Like Investing in the Internet in the ‘90s - 7th Jun 21
MAPLINS - Sheffield Down Memory Lane, Before the Shop Closed its Doors for the Last Time - 7th Jun 21
Wire Brush vs Block Paving Driveway Weeds - How Much Work, Nest Way to Kill Weeds? - 7th Jun 21
When Markets Get Scared and Reverse - 7th Jun 21
Is A New Superfuel About To Take Over Energy Markets? - 7th Jun 21
Why Tether USDT, Stable Scam Coins Could COLLAPSE the Crypto Markets - Black Swan 2021 - 6th Jun 21
Stock Market: 4 Tips for Investing in Gold - 6th Jun 21
Apple (AAPL) Summer Correction Stock Trend Analysis - 5th Jun 21
Stock Market Sentiment Speaks: I 'Believe' We Rally Into A June Swoon - 5th Jun 21
Stock Market Russell 2000 After Reaching A Trend Channel High Flags Out - 5th Jun 21
Money Is Cheap, Own Gold - 5th Jun 21
Bitcoin and Ravencoin Cryptos CRASH Bear Market Buying Levels Price Targets - 4th Jun 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The Meaning Behind Gold’s Triple Top

Commodities / Gold and Silver 2021 Jun 02, 2021 - 11:59 AM GMT

By: Kelsey_Williams

Commodities

In a previous article I wrote:

“Looking at this chart, it should be apparent that gold at $2000 is fully-priced. Unless you are convinced that the US dollar is going to crash soon, then expectations for much higher gold prices at this point  are unwarranted.”  ($10,000 Gold Or A Triple Top?)

The article was published in August 2020 and the chart is reprinted below…


Gold Prices – 100 Year Historical Chart (inflation-adjusted)

Last August, the expectations for much higher gold prices were fueled by unreasonable expectations fostered by various items and events such as Fed money creation, interest rates, recession, weak economy, civil unrest, a contentious national election, etc.

None of these things have any bearing on gold’s price (see Gold’s Singular Role). Nevertheless, investors and analysts continue to point to them as justification for their expectations about the price of gold.

After posting an all-time high price of $2058 in August 2020, gold established two successive recent lows at about $1775 in December 2020 and $1675 this past March. Some of the fervor dissipated, but the past couple of months has seen a recurrence of gold fever.

Below is the same chart as above, but updated to include activity for the past nine months…

In the charts you can see that there are three distinct periods of rising gold prices. The first two periods were each a decade in length: 1970-80 and 2000-2011. And both of those periods were preceded by longer periods of time – forty years and twenty years – during which gold’s price was not increasing.

The third period was shorter in length and lasted five years from January 2016 to August 2020. It was preceded by a decade of declining gold prices.

The second chart confirms that the triple top is still intact. The price at which gold peaked last August is just shy of Its peak in 2011; and before that, in 1980.

So why did gold stop at those particular price points and what are the implications for those expecting higher gold prices now and in the future?

THREE PEAKS FOR GOLD

The stopping points in the chart are the points where equilibrium was reached regarding a gold price which reflects the dollar’s cumulative loss in purchasing power up to that point.

Peak No. 1  The average monthly price for gold in February 1980 (the month after its intraday peak of $848) was $664 and is shown on the charts. That price represents an approximate 97 percent cumulative loss in US dollar purchasing power that had taken place by that time.

Peak No. 2   Forty-one years later, in August 2011, the average monthly price peaked at $1825 (intraday high of $1895) and is indicative of a cumulative loss in US dollar purchasing power closer to 99 percent.

Peak No. 3   When gold’s average monthly price hit a new peak of $1971 inJuly 2020, followed by an intraday high of $2058 the next month, its price reflected a full 99 percent cumulative loss in US dollar purchasing power since the Federal Reserve began ‘managing’ our money.

The corresponding inflation-adjusted prices for the three peaks are $2248 oz. in 1980; $2151 in 2011; and $2032 oz. in 2020.

IMPLICATIONS AND WHAT YOU NEED TO KNOW

The successive inflation-adjusted peaks in 2011 and 2020 were slightly short of the 1980 peak. Further rises in gold’s price on an inflation-adjusted basis can be expected to stop at the same approximate points.

That is because gold’s value is constant and unchanging. One ounce of gold today has the same value that it did in 2011 or 1980 or 1920; and the value of one ounce of gold in the future won’t be any different, either.

Gold’s price, on the other hand, can continue to rise over time as the US dollar continues to decline. However, the price of gold does not tell us anything about gold. It only tells us what has happened to the US dollar. 

Increases in the price of gold come “after the fact”. Gold’s price action is not anticipatory of future conditions, events.

Gold’s higher price over time reflects the actual the loss in purchasing power of the US dollar. The point of origin is fixed convertibility at $20.67 oz. when paper dollars could be exchanged for gold at that fixed price.

Since the only reason for a higher gold price is a further decline in the US dollar, then the price of gold cannot be expected to rise further to any meaningful degree until after the dollar has lost additional purchasing power.

As of this point in time, any price for gold close to $2000 represents a ninety-nine percent loss in purchasing power of the US dollar.  That brings us back to our opening statement that gold is fully priced at $2000 oz.

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and ALL HAIL THE FED!

By Kelsey Williams

http://www.kelseywilliamsgold.com

Kelsey Williams is a retired financial professional living in Southern Utah.  His website, Kelsey’s Gold Facts, contains self-authored articles written for the purpose of educating others about Gold within an historical context.

© 2021 Copyright Kelsey Williams - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in