Correct. The higher price for gold is a reflection of the corresponding loss in purchasing power of the US dollar; which is an effect of the inflation created by the Fed.

Point 1: I am not at all "defending the Fed", as you say. Nor, did I use the word "relic" in reference to gold; or say anything similar to that. The Federal Reserve has destroyed the US dollar over the past century by continually expanding the supply of money and credit. That debasement of the US dollar has led to a decline of more than ninety-eight percent in its purchasing power. That decline in purchasing power is the reason for gold's higher price over time from $20 per oz. to $1700 per ounce. Point 2: Some gold investors are way too price conscious; nay, price-dependent is a more accurately descriptive term. They seem to be constantly in need of higher prices to justify their predictions for gold. Point 3: The purpose of the article is to point out how each time higher price expectations aren't met, the price predictors trot out the price suppression argument. If they understood and accepted the argument for everything it implies, then they would already own physical gold and they wouldn't have to defend their errant price predictions. Point 4: The case for gold is not about price. It is about value. Gold's value is in its use as money and its value is constant and stable. It is the original measure of value for all other goods and services. Gold's price tells us nothing about gold. It tells us what has happened to the US dollar; nothing else.

ALL currencies are substitutes for real money, i.e., gold.

Yes, that's true. They have intentionally expanded the supply of money and credit for more than one hundred years. But all of their planned efforts are having less and less impact. It could get away from them. All of that QE won't have the intended effects if everyone heads for the exits at once. Eventually, they will probably kill the US dollar for good, but the timing could be skewed considerably.

If the US dollar continues to decline, then gold prices will reflect that by moving higher.

Gary, thanks for your comment. To clarify: The original money credited to the government in exchange for the Treasury Securities (a government IOU, promise to pay) is strictly new money that is created out of thin air. It is 'monetizing the debt' at the point of origin. It does not come from money or assets already in the system. My hypothetical example in the article was meant to relate the issue on a more familiar level as well as illustrate the absurdity of the Fed/Treasury transaction. However, even on a retail basis - whatever collateral is provided by the borrower - the loan proceeds advanced are a creation of new money, too. All loans made by banks are 'new money' that is then added to the system. That is only possible due to our system of fractional-reserve banking. Our money today is mostly credit. The 'dollar' balances in the system are over-leveraged and under-collateralized.

Of course.

Good article with common sense concern about housing and capital expansion. Fed has a dilemna of their own making. Artificially-contrived low interest rates fostered 'drug' -induced highs in economic activity that were unsustainable. But there is always a price to pay in the form of withdrawl symptoms. We may be on the verge of experiencing those symptoms/effects in the extreme, regardless of the Fed's efforts or intentions.

And, yet, we still operate financially within the context of a fractional-reserve banking system. Hence, any reserve requirement less than 100 percent is implicit of excess reserves. And derivatives are a huge subset of the system which continues to re-leverage the same money over and over again, even after any initial reserve requirements are met. The threat of a credit implosion grows exponentially regardless of the Fed's tinkering and eventually there will be a forced de-leveraging. 'When' is anybody's guess.

Good article!