Potential Highs And Lows For Gold In 2020

Practically speaking, though, there are some potential limits to gold’s price rise.

Referring again to either of the charts above, we can see that the price of gold declined for twenty years between 1980 and 2000. We might be in the middle of a similar period right now; in which case, gold might be headed lower first, for several more years.

Another potential limit to higher gold prices is the threat of deflation. During deflation, the supply of dollars would shrink and the dollar would gain in value/purchasing power. Under those conditions, the price of gold would decline, reflecting new found strength for the US dollar.

Finally, please see the chart below, which is a 100-year history of gold prices adjusted for inflation…

As you can see, the price of gold at its peak in 2011 was actually lower than its peak price in 1980 on an inflation-adjusted basis. (see Gold And The Elusive Chase For Profits)

What this means is that one ounce of gold today at $1700 has less purchasing power than one ounce of gold in 1980 at $800. Eventually, the price of gold will approach and exceed its previous price peak from August 2011. But, in inflation-adjusted terms, it will not exceed either that peak or its 1980 high.

That is because the real value of gold is constant and unchanging. Gold is the measure of value for everything else.

No matter how high the price of gold goes, it will only be indicative of how weak the US dollar gets. And, however high that price is, gold will not exceed its previous peaks of 1980 and 2011 on an inflation-adjusted basis.

1 2
View single page >> |

Kelsey Williams is the author of two books: Inflation, What it is, What It Isn't, And Who's Responsible For It and  more

How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.