Tuesday, October 20, 2009

How High Can Gold Go?

There are lots of different methodologies you can use to derive a benchmark price to measure possible price targets for the yellow dog.   One such measuring stick is proved by John L. Williams' Shadow Statitistics, which tracks Government-reported economic statistics and exposes the ways in which the Government has fraudulently manipulated these metrics.

One such metric is the CPI calculation, which the Government began manipulating right after Nixon closed the gold window in 1971.  Arthur Burns, then Fed Chairman, devised rationals for using data which ultimately underestimated the Government-reported inflation statistic.  With each successive Presidential Administration and Fed Chairman, this manipulation of reported inflation became more blatant, absurd and unequivically disconnected from a real meaure of price deflation, and its tautological twin, dollar devaluation.

Williams recently showed that IF the Obama Administration were, in the spirit of restoring the honesty in Government that Obama promised during his election campaign, to go back to 1980 and use the same methodology to calculate inflation that was used when Paul Volker was the Fed Chairman, the inflation-adjusted "fair value" for gold would be $7,150:
“If the methodologies of measuring inflation in 1980 had been kept intact, gold would have to hit $7,150 to be the equivalent of the 1980 record,” Williams said
So there you have it.  I have come across several other "what if" calculations, and will perhaps present these in a future post.  But I'll close by saying that, from time to time over long periods of U.S. history, the Dow/Gold ratio occassionally hits a ratio of 1.  Right now that ratio is 9.5.   What this tells me is:  1) We have a LONG way to go before the gold bull reaches a top; 2) Gold is extraordinarily cheap vs. the stock market; and 3) The price of gold has a LONG way to go before it catches up with the 80% dollar devaluation that has occurred since 1971 (that statistic can be found on the Fed website).

Apparently no one in the Government sends their kids to college:  College Tuition To Rise Sharply Again This Fall


  1. Get off Marketwatch before we throw you off.

    Stop spam.

  2. Did you see the story about CME now accepting Gold?

    This was the second report we had on it.


    By the way I tried sending you my e-mail for that report you offered and it came back as spam.