Inflation is higher than they would like you to believe.
Inflation is higher than they would like you to believe.
The US government is telling everybody that inflation is 3.4% per year. That is not correct. Try 14.2% and that's about right. Source : gold/usd 1 year simple moving average.
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The US is saying 3.4% because inflation is based on a consumer price index. It's not a good metric because it doesn't account for housing, education, healthcare and most other major expenses.
However, gold is an awful metric for the value of the currency. No single product can be a good metric alone. And gold is famously effected by speculation. People buy gold when the future of the currency seems uncertain.
Exactly. People buy gold when the future of the currency seems uncertain. And yet, the simple moving average of gold has risen 7.1% since January 1st of 2024. And so if inflation continues, at the pace it is, then it will be 14.2% by the time December 31st rolls around.
Did the USD deflate significantly between 2012 and 2016? Your gold based metric says yes.
From what I remember, those years were pretty steady and didn't do much.
I’ll accept without evidence that real inflation feels a lot higher than 3.4%, but proposing short term shifts in the price of gold, or any other single commodity as a better metric is just nuts.
Well, shadow stats agrees with me. According to the way they measured inflation in the 1980s, we are about 12%. So even if my estimate was wrong, it's not off by far.
And the way they measured back then included things such as, oh, I don't know, food and energy, which are two things everybody just happens to need.
shadow stats
Bruh.
Yes, measure the things people need, not gold.
You’re speculating on what gold will be worth in six months. You have no idea if the current trends will hold or not. It’s not like the value of gold over the course of the past hundred years is a steady consistent climb. Past performance isn’t always indicative of future results.
You do have a point there. However, I would also point out that even the government inflation numbers say they are barely dropping and yet rates are the highest they've been in 20 years and the banking sector is going to have a big meltdown because of this commercial real estate. So yeah, it's speculation, but it's speculation based on data and trends.
But not all data is relevant. For some reason you're comparing gold and inflation, but gold isn't a currency (anymore) and thus isn't really related to inflation.
Gold prices largely reflect concern about the direction of the economy, they don't reflect currency valuations or costs of things. People move to gold when they think stocks are going to collapse, they don't move to gold when prices for things go up.
In the words of Warren Buffett (from memory, not a direct quote):
Be fearful when others are greedy, and greedy when others are fearful.
The way I read this is:
- gold is high (people being greedy)
- stocks are recovering (hit in 2022)
- bonds are down (rates have been going up)
So I think gold will see a correction in the next 6 months, and those people will likely flock to stocks. But that depends on economic indicators remaining strong, inflation figures dropping, and bond rates staying steady or dropping a little. Depending on the election outcome, we may see stocks correct a bit as well.
But I don't think we'll see a "housing meltdown" because inventory is still low in many areas and new construction isn't keeping up with demand. I think we'll see housing level off once builders can catch up and real wages recover from the cash injection in 2020.
So in general, I'm bearish on gold, and "wait and see" on stocks until after the election. None of this impacts my investing strategy though, which is the same as it has always been, it only impacts my speculation budget.