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12/14/2005 Archived Entry: "Gold is still cheap"
BUY GOLD FOR LESS THAN $240 PER OUNCE. Is it too good to be true? As David Morgan, editor of The Silver Investor points out in
How to buy Gold for $252.00 per ounce! what is happening isn't so much gold going up as the value of our currency being systematically destroyed.
Sure, gold closing at $540 made headlines, and represents a 24-year high. But the value of the dollar has plummeted in those same 24 years. Morgan links directly to the FED's own calculator to show that $540 today buys only about as much as $252 in 1981, the last time gold sold for $540 per ounce. As of noon today the spot price has fallen to $511.60, equivalent to $239 "1981 dollars." Such comparisons are tricky and fraught with error, but as Morgan points out, the FED's calculations are likely to be kinder to the FED than most of us would be. Being the victim of relentless theft tends to skew one's opinions about the thieves.
Gold is a commodity and follows the same rules of supply and demand as any commodity. Demand is surging right now both for seasonal reasons and because a tiny fraction of people are losing faith in the bits of colored paper that we are forced to use as money. Gold is still a bargain by pretty much any historical measure you care to use.
I buy gold not because it is a good investment, but becuase I'm pretty sure it is not a bad one. Gold in any of its many forms is also a welcome and treasured Christmas gift.
Posted by Silver @ 11:09 AM CST