Gold Price Rising: What's it really mean?
The gold price, like any other price, goes up and down. Up and down in the short run, that is.
In the longer term, there's the "trend" of the gold price. Like the price of any other item, we should be more interested in the trend rather than the daily movements up and down of any price.
Daily price movements don't really tell us much - again, they go up and down. But the trend, when you can determine it, says a lot. Now it's rising. In fact, it's been rising since the beginning of the century. You don't have to be a technical analyst or financial genius to see that gold's been in a bull market.
Why's has it been in a bull market? There are all sorts of theories. One says it's got to do with the dollar. When the dollar's weak, gold gets strong. But the dollar's had ups and downs this century. It hasn't been all weak or all strong. Yet gold has crept steadily higher.
Another theory says that it means inflation's here and people buy gold to protect themselves from the loss of value of their money through inflation.
Back around 2003, I was at a lunch where the guest speaker was Steve Forbes. I got to sit at the same table Steve sat at during lunch, before he gave his talk. He seemed like a nice guy, friendly, relaxed, not full of himself. Pleasant company during lunch.
During his talk, someone asked him about gold. What did the rise in the gold price mean? Back then, gold was just breaking through 400 per ounce. Forbes answer was interesting.
He said that if gold went back below 400 (which he expected), it would mean that the dollar would be stable and inflation would be under control. If it went above 400, it would signal a bout with inflation. He didn't expect it to go much above 400 in any case.
Well, gold continued to rise, but there was no meaningful inflation. Government statistics like the CPI don't show very much inflation since the beginning of the century. There have been some spikes. But not big trends - at least none the government's been able (or willing) to measure.
I'm not picking on Forbes. Like I said, he struck me as a nice guy - and, frankly, a pretty smart guy. It's just that the gold price strikes me as something most people really don't understand. So we'll spend more time talking about gold form now on. I think it's going to become a bigger and bigger story as time goes on.
In the longer term, there's the "trend" of the gold price. Like the price of any other item, we should be more interested in the trend rather than the daily movements up and down of any price.
Daily price movements don't really tell us much - again, they go up and down. But the trend, when you can determine it, says a lot. Now it's rising. In fact, it's been rising since the beginning of the century. You don't have to be a technical analyst or financial genius to see that gold's been in a bull market.
Why's has it been in a bull market? There are all sorts of theories. One says it's got to do with the dollar. When the dollar's weak, gold gets strong. But the dollar's had ups and downs this century. It hasn't been all weak or all strong. Yet gold has crept steadily higher.
Another theory says that it means inflation's here and people buy gold to protect themselves from the loss of value of their money through inflation.
Back around 2003, I was at a lunch where the guest speaker was Steve Forbes. I got to sit at the same table Steve sat at during lunch, before he gave his talk. He seemed like a nice guy, friendly, relaxed, not full of himself. Pleasant company during lunch.
During his talk, someone asked him about gold. What did the rise in the gold price mean? Back then, gold was just breaking through 400 per ounce. Forbes answer was interesting.
He said that if gold went back below 400 (which he expected), it would mean that the dollar would be stable and inflation would be under control. If it went above 400, it would signal a bout with inflation. He didn't expect it to go much above 400 in any case.
Well, gold continued to rise, but there was no meaningful inflation. Government statistics like the CPI don't show very much inflation since the beginning of the century. There have been some spikes. But not big trends - at least none the government's been able (or willing) to measure.
I'm not picking on Forbes. Like I said, he struck me as a nice guy - and, frankly, a pretty smart guy. It's just that the gold price strikes me as something most people really don't understand. So we'll spend more time talking about gold form now on. I think it's going to become a bigger and bigger story as time goes on.
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