Source: Valcambi Gold Inc
GOLD & Monthly closes since 1970
When experts claim gold to be in record high territories and therefore being in a bubble, they mostly refer to gold’s long term chart (monthly closes). When looking at this chart one would easily believe that gold is a bubble indeed therefore an accident waiting to happen. It’s recent high of $1925+ seems to be too far stretched from its long term average of $448. The problem however with this chart is that it is extremely distorted. The distortion arises from the fact that this chart doesn’t take into account the loss of purchasing power of the dollar over time. Needless to say the purchase power of a 2011 dollar doesn’t match the purchase power of a 1980 dollar. Yes, bull markets do end when approaching bubble territories, but we are far away from that. During previous ‘real’ highs more than 20% of all invested money was in gold and gold shares, today this percentage is still below 1%.
Gold & Historical Average measured against official government CPI statistics
In order to calculate ‘real’ highs for gold one has to adjust for inflation. When using government inflation statistics then we’ll see that the 1980 peak of $850 equals $2500+ today. Since no secular bull market ever ended without making new ‘real’ highs gold’s current bull still has a long way to go.