That’s certainly part of it (and the argument most gold bugs make as to why we should all be buying gold), but gold has gone up 133% in the last 3 years which is wayyyyy beyond inflation tracking.
That’s certainly part of it (and the argument most gold bugs make as to why we should all be buying gold), but gold has gone up 133% in the last 3 years which is wayyyyy beyond inflation tracking.
If Gold kept pace with inflation (roughly $35 an ounce in 1970 dollars) it would be ~$279.98 an ounce in 2025 dollars.
So inflation has almost nothing to do with the current price of gold and the grandparent post’s speculation about the futures market running hot is far more likely. The price of gold isn’t attached to the dollar and hasn’t been for over 50 years.
The retail price index probably understates the effect of inflation. The amount of gold to buy a house say has remained fairly constant over time.
I would like to see that chart because houses have also spiked significantly in price especially since 2008. That maintaining a consistent ratio would at least eliminate the dollar from the equation showing value not just dollars.
A quick sanity check of my own house would show that it would cost something like 75 ounces of gold. It was built in the 70’s and originally sold for 45,000, or well over 250 ounces of gold in gold prices from around then. Doesn’t seem right…
There's a chart here for the UK https://auronum.co.uk/gold-vs-bricks-how-many-ounces-you-nee...
It fluctuates a fair bit but starts and ends at ~150oz/house
And the US https://www.longtermtrends.net/real-estate-gold-ratio/
The other way to think about it is that the price of many other things may have gotten cheaper (in terms of labor/capital) at the same time as fiat inflation.
But how can you untangle an objective production price from the fiat / economy it's produced out of?
If that were the case, you'd expect scarce but still produced assets (e.g. housing) to have both increased in price (due to fiat inflation) and decreased in price (due to production technology efficiencies).
Which one dominates to what degree likely depends on the asset.
Inflation has been masked and understated for decades. Some of the inflation was concealed by getting rid of domestic production in favor of cheap imports. These chickens are coming home to roost.
Gold can be an asset. But the way it functions as a financial instrument is more like a short against fiat currency. That is, when inflation starts (or at least when it comes to peoples' attention), gold will move by more than the amount of inflation. When peoples' awareness of inflation goes down, gold goes down, even if inflation is still greater than zero.
Note well: This is my impression. I have not tested this hypothesis against historical data.
The fed doesn't even publish M3 anymore (which is what tells us how much fiat there is in circulation). So we really don't know. We do know that as of 2020 America no longer uses fractional reserve banking. The collateral requirements for banks are now zero. There's more kinds of inflation than just M3 growth. There's also loss of faith in the dollar. Loss of creditworthiness of the USG. But most importantly, the loss of people willing and able to work. Gold measures all of them. The value proposition of treasuries is they pay yields which means you can extract surplus value from American labor. However with such a sickly aged population, it's more of a risk that Americans will exploit the dollar to fund their own retirements instead. Goldman Sachs said a month ago when gold was $3500 that if just 1% of treasury holders decide that a rock which doesn't do anything is a safer better investment than the American people, then gold is going to go to $5000.