Gold Is Not At A Record High

Gold, gold, gold! Fools, fools, fools!

Ads are everywhere extolling the virtues of bullion, and they keep pointing to “record high gold prices” as a reason for snapping up some piece of shiny yourself. The wisdom of jumping in on an asset that has already had a run-up in its price aside, gold is not at any kind of record high.

Once you adjust for inflation, gold is 40% below its peak value 30 years ago. Back then it was at $2,318 an ounce, in today’s dollars. This week it closed at only $1400. Don’t believe the hype.

The Myth of Record-High Gold [Economix]

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  1. Tongsy says:

    Gold is going above 2300 dollars! quick! buy now!

  2. PLATTWORX says:

    I have been suprised for a while that all these companies who clearly are not being honest have not been sued or investigated. Heck, I am seeing gold stores opening in malls just to buy gold. Is this like the mortgage crisis… where the governement stands back and watches people get screwed and then jumps in way too late?

    • Rose says:

      Except that gold is high enough to make purchasing it from the public profitable, so buying kiosks in the mall makes sense.

      And if you sell your gold for cheap, you don’t lose your home. Or anything, really. And no one is sending out thugs to take your gold without the proper paperwork. Also, you get money from it.

      Wait, how is it like the mortgage crisis again?

  3. Awesome McAwesomeness says:

    Seems like you should buy low and sell high. Why would you want to buy it when it’s at it’s highest price ever? You wouldn’t make any money off of it then.

    • Portlandia says:

      That’s the exact comment I was typing in. Any commercial that gives such stupid advice is obviously a scam of some sort.

      • RvLeshrac says:

        As the value of currency drops, the value of gold rises, and vice-versa. Gold should never be considered an “investment.”

      • INsano says:

        Not that Helicopter Ben and a printing press central bank aren’t a problem but…

        Your paper fiat is being devalued, your savings are in jeopardy. You should get into gold. What do I want for my gold? Your paper fiat.

    • hymie! says:

      Because just like houses, the value of gold can only ever go up.

      • evnmorlo says:

        Stable elements do not deteriorate like houses. Though I guess your analogy works for the most part for land

        • Tim says:

          No, but demand can decrease.

        • Gulliver says:

          Stable elements? Gold has no intrinsic value other than what PEOPLE place on it. Gold can not even feed you, clothe you, or shelter you. A home has a value in that t can protect you from the elements. The whole concept of the gild standard is ridiculous. Why does gold have any value at all? It is one of those fallacies that uneducated people think about the good old days.

      • lordargent says:

        It can go up and down.

        But the trend over time is for things to go up.

        /for a sufficiently large increment of time

    • smartmuffin says:

      Anyone who simply follows “buy low and sell high” is going to lose a lot of money on the lows, and leave a lot of money on the table on the highs. You don’t buy a stock, a fund, an ETF, or a commodity just because it’s price is low (even if it’s a record low) and you don’t sell it just because it’s high (even if it’s a record high). You buy and sell based on your prediction of where it will go in the future. Would you have bought Lehman Brothers at $40 just because that was low? How would that have worked out for you? How about selling Apple at $90?

      How much it costs right now is only relevant in relation to how much you expect it to cost in the future. Investments can be insanely undervalued even while trading at “record highs” Honestly, this is something most people learn within their first few months of investing…

    • DangerMouth says:

      Ask the people who invested the equivalant of a house on a single tulip bulb in Holland in 1643, and research the ‘greater fool’ theory.

      As long as there is a greater fool than you out there, you can make a lot of money speculating. Until the fools wake up, of course ;~)

  4. ceriphim says:

    It’s still (IMO) being pushed to “Bubble” numbers right now. Not wise to invest in something when it’s peaking, despite all the hype and BS to the contrary…

    • dangermike says:

      ceriphim is right. If you are really worried about the dollar value of your savings account, look for less frothy commodities. Gold is currently hovering in speculative territory. If you don’t mind the risk, investing in developing economies looks to be the next big thing.

  5. fredbiscotti says:

    Any time business and financial types are trying to talk regular folks into getting into an investment, the party’s over.

    If it was a good deal, they wouldn’t be advertising it on TV. They’d quietly be buying as much as they could possibly get.

  6. Blueskylaw says:

    If you want to invest in gold, then invest when the stock market is booming not when gold is at a high and the market is recovering. Three years ago when the Dow was at its highest gold was “low” priced, when the market slowly recovers what do you think will happen to gold prices?

    Remember, the trend is your friend.

    • Anonymously says:

      Remember, past performance is not necessarily indictive of future results.

      • Coelacanth says:

        Perhaps not always, but understanding market fundamentals might give you a pretty good idea how the market behaves under “normal” conditions.

        All investing has its risks. Even staying in cash.

    • nova3930 says:

      Thats exactly the last time I bought gold. I picked up quite a bit @ $650/ounce and recently divested myself of all of it for a tidy little profit….

    • magus_melchior says:

      Or, you could do what Warren Buffett does– Invest when everyone is scared, and be scared when everyone is excited.

      • OnePumpChump says:

        That’s what Blueskylaw was saying to do. Except people don’t really get scared of gold, other things just start looking better so they sell it for greener pastures.

    • nocturnaljames says:

      You think the economy is recovering? LOL it’s smoke and mirrors, along with money printing.

  7. mattarse says:

    With gold it’s also wise to pay attention to how it is faring in competing currencies. Alot of the price increases in the US recently are negligible in other countries because the gold prices are going up as the dollar falls. When the dollar goes back up, gold prices drop.

    However, as long as you buy when it’s low and sell when it’s high – you’re doing ok.

  8. loueloui says:

    I definitely see this as the next big bubble waiting to burst. You can practically throw a rock from one ‘We buy Gold!!!11!’ shop to the next. If they wanted gold as badly as they say they do, you’d think they would go find a Zales or something.

    Strangely, this may be the only commodity where these crooks could get away with this. Imagine a store that advertised ‘We buy commodities at far lower than their actual value!’

    • jesirose says:

      I don’t mind those places. I had a gold bracelet with teeny diamonds. I just wanted to get rid of it and get some cash. No one bought it on craigslist, so I took it to a shop that buys that stuff. Got $50 for it. Who got harmed?

    • MFfan310 says:

      Jewelry stores around here recently started advertising that “we buy gold”, which they (surprise!) always have.

  9. Macgyver says:

    Inflation has nothing to do with how much it’s worth.
    If you sell an ounce of gold now, you will only get what it’s worth now, you won’t get any more.

  10. GregD says:

    The people talking about how gold is going to keep going up past $2000, and you are a fool if you don’t jump on the bandwagon now remind me of about three years ago listening to a realtor telling me about house prices were never going to go down, and at best they might level out a bit. Now, the last time I heard he’s looking to get out of real estate all together.

  11. JulesNoctambule says:

    I expected a classic Stone Roses video after the cut.

  12. LastError says:

    Gold isn’t at it’s high, which in theory means there may be some upside left.

    But it does not matter.

    Certain nations like Russia have vast gold reserves and could at any time of their choosing release some of that on the market, thus deflating prices in an instant, which could take decades to recover. It would be an economic act of war but it is within their power to do so, and of course the best time to do that sort of thing is when you think your adversary has put all of their eggs in that basket. This push to convert assets to gold is nothing but putting eggs in that basket with a huge bullseye on it.

    Would you entrust your assets into the hands of an adversary and hope they play nice? No. You don’t, if you are smart.

    • daveinva says:

      “Would you entrust your assets into the hands of an adversary and hope they play nice?”

      Good thing our bond market is owned by our super-friendly and dependable ally China… oh, wait.

    • zifnab0 says:

      “Would you entrust your assets into the hands of an adversary and hope they play nice? No. You don’t, if you are smart.”

      I’m pretty sure this is why many people are moving their money OUT of dollars.

  13. Rocket80 says:

    Wouldn’t this fact make me MORE likely to buy it? I’m confused as to the intent of this article…err, blurb. The fact is, if the Fed. keeps printing money, gold (and ALL commodities) will necessarily go up in price (inflation). That is the nature of a fiat money system.

  14. LHH says:

    To those of you saying that this is the next bubble don’t bother wasting your breath. People don’t listen. Ever. Right before the dot bomb hit folks with half a brain were asking “How can a company in the red that doesn’t really do anything have such a high IPO/stockprice, etc…” They were roundly condemned for “not understanding the new economy.”

    When folks were asking “How can home prices keep climbing at this unsustainable rate?” They again were shushed as not having a clue or getting it.

    I firmly believe that this is the next bubble. Some will make a killing, others are just gonna get killed. It is always too late to get in on something after everybody else knows about it.

    There is just no saving some people.

  15. redskull says:

    I’ve also noticed a sudden rise in the number of “We Buy Gold” stores in my area. It’s always puzzled me as to how so many of these stores can have enough business to survive. Do most households really possess enough large surpluses of gold (that they’re willing to part with) to keep these places running? I sure don’t have any gold bricks lying around my house.

  16. smartmuffin says:

    Right, let’s ignore the ENTIRE premise of why people are recommending gold (because of imminent hyperinflation) and just say everyone who is recommending it is a liar and an idiot. I put a few thousand into a precious metals fund before the market crashed and right now it’s up some 40%. How’s that compare to your precious certificate of deposit?

    • LHH says:

      My comment was not directed to folks such as yourselves. My comments are directed to the Johnnie Come Lately’s that run headlong into things at the wrong time. Obviously you and some others got in at the right time. But others are trying to jump on the band wagon after it has rolled past. Gold will very probably keep going up for a bit. But it will eventually come tumbling down. Pretty much like every things else eventually. Especially if this “hyper-inflation” never comes to pass.

      The thing about a bubble is that they are hard to predict just when they are about to become foam.

      • smartmuffin says:

        Except there’s still plenty of legitimate financial professionals who believe gold still has plenty of upside. Yes, anyone buying gold right now has already missed a large move. Doesn’t mean it can’t go higher. As I said in an earlier reply above, just because something is at a “record high” doesn’t mean it can’t go higher, and just because something is at a “record low” doesn’t mean it can’t go lower.

        I’m not selling any of my position just yet. I still see plenty of upside. There’s plenty of room for gold in your balanced breakfast… I mean, diversified portfolio.

        • LHH says:

          I hear ya. I’m not in anyway saying you are wrong. But on that same note a lot of those same financial professionals claimed the DOW would break 16000. Right before the bottom fell out. A lot of those same professionals continued to claim Real Estate would just keep going up. Right before it plunged off the cliff.

          Like I said it is hard to predict just when a bubble is going to pop. But pop it does.

  17. daveinva says:

    While not a gold bug myself, I’ve always enjoyed the ignorant criticism of purchasing precious metals as a hedge for uncertain economic times.

    It’s a *portfolio*, folks. You have enough money to diversify, there’s nothing wrong with diversifying; just the opposite, in fact.

    The unavoidable truth is that for the last ten years I’ve read, re-read, and re-read again every “reputable” economist and financial advisor from Kiplingers to CNBC to everywhere in between scoff loudly at the “fools” who bought gold at $400, $1000, even $1500, telling them again and again that they were stupid for jumping on a doomed bubble bandwagon.

    Yet, guess what? Gold went up. And up. And it’s still going up.

    Perhaps it’s a bubble. Perhaps it’s not, simply a cyclical deal that is about to begin cycling downward.

    But how do I trust the financial gurus who tell me the gold bubble is about to burst when their own vaunted expertise condemended the gold bugs for their alleged foolishness back at $400 an ounce? How did they suddenly get smarter now in predicting *when* the bubble bursts?

    My gut says gold won’t go up much more. But *my* gut said that about two thousand dollars ago, which is why I stupidly never got in on the gold rush. I wish I had, because it sure would have compensated some for the bath I took in the market over that same time.

    • FoxCMK says:

      Right on. While the gist of this article is harmless and accurate enough, it intentionally leaves out bits like the one you’ve written here because in the very specific context addressed in this blog post, it’s irrelevant.

      This article is taking issue with the simple fact that gold is not really at a “record” price, and that it’s just sensationalist advertising attempting to get you to sell your gold.

      Thanks for this comment. ‘Twas a good ‘un.

    • smartmuffin says:

      Great comment. It’s one thing to point and laugh at everyone who busts out after a bubble pops, but to do it beforehand while they’re making money and you aren’t is a little foolish. A lot of people made money on the housing bubble by getting out in time. A lot of people made money on the dot-com bubble by getting out in time. A lot of people have made money on gold thus far. Some might get out in time, some might not. I bought into the fund I’m in at around $800. I had already “missed” a fairly significant move. I’m not selling just yet though just because it’s at the top. Sure, there’s a lot of shady characters out there shilling it, but there’s a lot of well respected financial minds who AGREE with them that we’ll see $2500 within the next five years.

  18. RobofNYC says:

    No gold is not at its inflation adjusted all time high. But if you ignore a few weeks, it is damn close. After hitting 800+ in January 1980, it was down to $500 by April 1980. It broke $700 once more in 1980, then had a twenty year, mostly downward trend. It did not break and stay above $500 until almost 2005. So, taking out a few weeks – it really is in uncharted territory if this price holds more than a few months. the price of $500 (which was far more typical of the 1980’s) translates to $1,131.00 at todays dollar.

    • Gulliver says:

      The question iis WHY is gold at this leevel> The answer is simple. People who own it now want to push it as hard as possible. Just like any PONZI scheme. You buy in low and give tales of why gold will be the greatest thing ever, then as the lower tier buy in, the marklet collapses while those at the top get out.
      Gold has no REAL value.

  19. zantafio says:

    Should you invest in gold?

    Well let’s see…
    Ron Paul, Glenn Beck, Adam Curry….
    Three conspiracy theorists nuts cheering for gold.

    Nuff’ said!

    • poco says:

      No no no, you don’t get it. Glenn Beck explained clearly and rationally why we should all buy gold. It was in the segment right before the commercials. You know, the commercials selling gold?

  20. Nick says:

    You can’t eat gold.

  21. Portlandia says:

    The advice they give in these ads is so oposite to logic it’s laughable. They’re recomending purchasing at the top of the market.

    If the price was really that low and it was a great investment they would quietly be buying it up for themselves.

    More likely they will charge huge commisions on the purchase of gold as well as “pumping” the sprot price of gold through increased demand and allow them to make a killing on selling gold options.

  22. poolejc says:

    By all of the speculation that gold is a bubble about to pop create an actual bubble? I mean if gold dipped 100-200 dollars then people start unloading their gold positions for fear of the bubble popping. Price continues to go down, more people jump off, creating a wild, fast ride to the bottom???

  23. Marumm says:

    Here’s a chart showing the inflation-adjusted price of gold from 1871. According to this, it IS nearing a record high:

    http://www.vanguardblog.com/2010.07.26/gold-rush.html

  24. George says:

    Goldman Sachs has been hoarding physical gold for years ,George Soros caught using APMEX coupon codes.yes, the same people that are telling you Gold is in a bubble are getting their hands on it like it’s going out of style.

    so yeah, gold is in a bubble….derp!