Gold has had a fantastic run, getting to within sight of $2,000 recently. Many see this as a clear indication of hyper inflationary pressures arising out of loose monetary policy. The informed recognise that you can’t have hyperinflation if all sensible measures of actual prices other than a particular, volatile commodity are showing very low inflation.
Some stories about gold today and recently:
- Krugman theorises on how the high gold price might be a result of a very low real yield and a particular “choke point” for the future gold price at some distant future point. It seems theoretically interesting, but I’m not quite ready to use this as a working theory.
- Gold now available via ATM in China (but also in Europe and the US)
- Gold down almost 16% from it’s $1,920 intra-day high a few days ago, including a $100 free-fall reflecting the relatively low liquidity of gold markets.
Now I don’t spend much time on gold as an investment, but these stories are certainly interesting.
I’ll leave you with one thought (for the OMG! Inflation! of my readers). If the gold price is a measure of “real prices” in the economy, but prices of actual goods and services are more or less unchanged in dollar terms, this means the price of these items in gold terms has plummeted massively. Do you really think that a scenario where all prices are half of what they were two years ago is workable? What should have to wages? What needs to happen to wages? What will likely actually happen to wages? Does any part of this scenario seem like a Good Thing?