re: "Ya can still buy a gallon of gas or a bag of groceries for the same amount of gold it took last week, last month, last year, last century."
I view it a little differently.
The value of gold fluctuates greatly in the short run but stays constant in the very, very long run. The fact is, an ounce of gold bought in 2001 for $300/oz can buy many more bags of groceries today than it could then. It has outpaced the cost of bags of groceries in a big way.
But if you look at the average number of bags of groceries gold could buy over the last 100 years or so and compare it to the average number it will be able to buy over the NEXT hundred years or so, there won't be much change - unless something fundamentally changes in the availability of either good.
From 1980 to 1999, gold dropped in price relative to other goods. There were numerous reasons, but I can think of these:
o Intelligent investors had low risk means of GROWING their wealth and preferred those over merely PROTECTING their wealth.
o Unintelligent investors bought into the liberal rhetoric that gold had outlived its usefulness as money.
o Unintelligent investors believed that their governments could be trusted to not counterfeit fiat money.
o Central Bankers (who, contrary to popular belief, are actually no more intelligent than other human beings) concluded (erroneously) that their own enormous gold holdings were unnecessary - and began to sell them off.
By year 2000, gold was insanely cheap. It is now attempting to revert to the mean... and at $1,750/oz, has probably actually done so.
The only problem is, the world isn't the same as it was in 1980:
o Intelligent investors are not finding any low risk investments that can grow their wealth.
o Unintelligent investors have been burned by holding cash-based investments. Some of them are wising up to the fact that it is fiat money that is nearing its demise.
o Unintelligent investors are beginning to understand that their government HAS been counterfeiting money and will accelerate the process since there is no reason not to.
o Central Bankers have stopped selling their gold; now they're buying (or stealing) it back.
In this changed climate, gold should continue to outpace most other goods. Its value relative to other commodities with enduring value (such as food and tools) should continue to grow for some time. Its value relative to commodities with depreciating value (such as fiat money, Justin Bieber concert tickets and, oh, Obamacare) should veritably skyrocket.
That's a long winded response, I know. I guess what I'm trying to say is that when other investment vehicles that reliably appreciate can be found by most investors, you want to be out of gold and into those other vehicles. When such other vehicles cannot be found, you want to be in gold. It protects wealth. Sometimes, that's the best you can do.
And I think that's the state we're in today.
Gold is $1,581/oz today. When it hits $2,000, it will be up 26.5%. Let's see how long that takes. - De 3/11/2013 - ANSWER: 7 Years, 5 Months
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