OK! I’ve had enough! This idea that Gold’s fair value is only $800 an ounce is causing my reason meter to redline. It’s making me a little cranky, so bear with me. This all started with a report that stated:
Claude Erb and Campbell Duke figured out the ratio between the price of gold and the stated price inflation from a historical perspective and determined gold was over-priced based on their numerical analysis.
I took this quote from a Daily Bell article. The Daily Bell does not take a position on any specific numerical analysis of the gold price, but did question the claim.
I will raise a new question. Did Erb and Duke consider the effect government subsidies have on the price of every day goods and services? I am familiar with the numbers likely used in the analysis and wrote about this very topic on January 30, 2013. I took my numbers directly from BLS tables.
In that article I drew reference to the price of goods under subsidy and then drew specific reference to the potential cost of a gallon of gas, absent subsidy. For the curious, there is strong evidence that a gallon of gas would be 2 to 3 times the “Fair” price we enjoy today.
So next time someone tells you the “Fair Value” of gold is really $800 an ounce, ask them if they based their statement and their analysis on “stated price inflation” or “government subsidized price inflation.”
Need I say more? This time, this is not my opinion, it is a question to which your answer may be different than mine – but, I doubt it.
For more breaking news and thought provocation, visit LearCapital.com on a regular basis and if you would follow me @DaveTheGoldDr I will raise many more questions that you are free to answer any way you like.