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Exploding Gold Prices Have Nothing To Do With Inflation

Posted Oct 15, 2009 10:30am EDT by Peter Gorenstein

If there are two things that just about everyone agrees on these days it's that the dollar will continue to plummet and gold will continue to soar.

The dollar will keep plunging, everyone agrees, because the Fed will keep printing so much new money that soaring inflation will eventually turn it into toilet paper.  Gold, meanwhile, will go to the moon as investors rush to try to hedge against this impending monetary disaster.

Balderdash, says Mike "Mish" Shedlock, blogger and investment advisor with SitkaPacific Capital Management.

The dollar's a buy here, in part because everyone is so darn certain that it's about to collapse.

And gold?

Well, gold is indeed going higher, Shedlock argues, but not for the reason people think.  Gold is actually a lousy inflation hedge, as evidenced by the period from the late 1980s to the early 2000s in which there was plenty of inflation but gold prices plummeted from $800 to $250.

But gold IS a good place to preserve value during a credit crunch, Shedlock says.  And that's what we're still having here.  So Shedlock is long gold, too, even though he thinks everyone else is buying it for the wrong reason.

112 Comments

Anthony
Anthony - Thursday October 15, 2009 10:37AM EDT

WWW.USDEBTCLOCK.ORG Get yourself some gold now!

frankmargel.com
frankmargel.com - Thursday October 15, 2009 10:39AM EDT

Exploding Doom and Gloom! This is the demise of the Bears that hang out in this mans cave! Poor Bears have been reduced to peddling gold. WOW! Smiles and later Gang!

Yahoo! Finance User
Yahoo! Finance User - Thursday October 15, 2009 10:40AM EDT

I'm just glad i have some physical gold and silver. I feel like a pirate, ARRRGGGG....

chubby
chubby - Thursday October 15, 2009 10:42AM EDT

The hairs on the back of my neck always stand up when someone talks about how "everybody agrees" on something.

Yahoo! Finance User
Yahoo! Finance User - Thursday October 15, 2009 10:43AM EDT

buy gold

taopraxis
taopraxis - Thursday October 15, 2009 10:44AM EDT

Everyone is in gold? How much physical gold bullion does the average American household portfolio contain? If you never report any real numbers, I'll have to assume you're just blowing smoke.

Yahoo! Finance User
Yahoo! Finance User - Thursday October 15, 2009 10:45AM EDT

If you pay attention to these three stooges, you deserve what you get.

taopraxis
taopraxis - Thursday October 15, 2009 10:50AM EDT

By the way, if "everyone" is buying gold, why are there so many places springing up to buy scrap gold? Do not scrap dealers need sellers to prey upon? If no one is selling gold, why are they in business? Why are the scrap dealers *buying* gold when they could presumably be making a fortune *selling* gold to "everyone"?

Red Foreman
Red Foreman - Thursday October 15, 2009 10:51AM EDT

Is it coincidence that the quality of the interviewees on this site parallel the quality of the hosts? Anyone who has paid attention to these morons this year has completely missed the rally. They trotted out bear after bear all year long in order to support their own short positions. And despite numerous requests, they refused to disclose their stock positions. Real stand up guys (Blodgett is a convisted market manipulator that has been banned from trading). Only a real loser would still pay attention to anything they say.

Yahoo! Finance User
Yahoo! Finance User - Thursday October 15, 2009 11:00AM EDT

don't worry, be happy, obama will fix everything mmm mmm mmm... obama will take care of this after the World Series....he needs to relax now mmm mmm mmm.. hey winning the Nobel Peace Prize is stressful mmm mmm mmm.. jobs? we don't need no stinkin jobs.. obama will wipe your nose and take care of you.. mmm mmm mmm stimulus MONEY going somewhere?????bawhahahahah they only spent 10%... the REST OF THE STIMULUS IS FOR THE LIBERALS IN2010 ELECTIONS.. GET A HOLD OF YOURSELF.. YOU CAN'T BE THAT STUPID PEOPLE.. THERE IS NO STIMULUS MONEY DOING ANYTHING ELSE... GREEN JOBS... BAWHAHAHAHHAHAHAHA WHERE??? NAME ONE MMM MMM MMM

JARAA
JARAA - Thursday October 15, 2009 11:01AM EDT

gold is ajockeying position to legitimize any future currency legitimization among the international community.

Yahoo! Finance User
Yahoo! Finance User - Thursday October 15, 2009 11:05AM EDT

Another liar.

Yahoo! Finance User
Yahoo! Finance User - Thursday October 15, 2009 11:05AM EDT

Gold, silver, guns and ammo. Everyone should be prepared for dollar failure. Are you that sure the dollar will be around next week, next year or 5 years from now? Maybe but you should prepare for anything.

Yahoo! Finance User
Yahoo! Finance User - Thursday October 15, 2009 11:05AM EDT

Another liar.

Yahoo! Finance User
Yahoo! Finance User - Thursday October 15, 2009 11:06AM EDT

frankmargel.com ------ How come your getting chubby over the bears demise? If the dollar loses it's value, how much value are your stocks and investments? So, you make $1,000 today and end up spending $1,000 more on oil, groceries, essentials ... because the prices go up. Kind of curious over your gleeeeeeeeeeeeeee?

davids
davids - Thursday October 15, 2009 11:08AM EDT

The scrap buyers are paying 30 to 40 cents on the dollar for gold and reselling at $ 1,000 per ounce. They are scamming people.

Yahoo! Finance User
Yahoo! Finance User - Thursday October 15, 2009 11:09AM EDT

SEE YOU PEOPLE WORRY OVER NUTTIN. WILL BE GREEN IN 52 MINUTES. BUY... BUY....BUY ... LIKE THERE IS NO TOMORROW

Yahoo! Finance User
Yahoo! Finance User - Thursday October 15, 2009 11:12AM EDT

Agree with this analysis. Money market returns are non-existent and the stock market is resembling a casino more than an investment. Leaves little options.

Yahoo! Finance User
Yahoo! Finance User - Thursday October 15, 2009 11:14AM EDT

Red - I agree and only a bigger loser would actually trade on it.The crowd calling for Blodgett to disclose his holdings was totally pathetic.

taopraxis
taopraxis - Thursday October 15, 2009 11:15AM EDT

While the interviewee makes a valid point regarding the extremely flawed nature of many foreign fiat currencies, he fails to mention the relative *size* of the global float of these various currencies vis a vis the dollar. Therein lies the error in his reasoning, in my opinion.

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