There has been much discussion in the press and elsewhere as to whether the amazing 12 year bull Gold Price rally may have come to a halt. There are those that point to the sell off and subsequent stabilization as proof of this, though many called for the price of gold to go much lower.
In a recent article entitled “Gold Is Undervalued In Fiat Money Terms,” Author Ben Davies states, “First off to state publicly, gold is still undervalued in ‘fiat money’ terms, that’s the easy question to answer.” Gold has inherent value against any flimsy paper currency which rests on the unsteady trust the public has in their government which rises and falls depending on any number of things not the least of which is inflation.
Mr. Davies goes on to say, “People have said to me gold has gone up a lot, and so now it’s too high. I always reply that gold has a price and a value. These two constructs are not interchangeable. Price is a level at which you make an exchange, and value is whether it is worth it.”
The author of “Paper Money Collapse,” Detlev Schlichter notes, “After 40 years of relentless paper money expansion and in particular 25 years of Fed-led global bubble finance, the dislocations in the global financial system are so massive that nobody in power dares to turn off the monetary spigot and allow market forces to do their work, that is to price credit and to price risk according to the available pool of real savings and the potential for real income generation rather than according to the wishes of our master monetary planners.”
It can be said that in looking at the price of gold, the only element that changes in the gold/price equation is the value of the dollar and not the value of gold. As inflation eats away at the value of the dollar it is reflected in the continuing rise in gold prices.