Monday, January 26, 2009

WHY GOLD?

Why Gold and Why Now?
Do you remember the last time gold sold for over $2,000 per ounce?
Of course you do. Maybe you didn't think of that way. But actually, gold has already sold for more than $2,000 per ounce. Let me show you.
First, you have to think for a moment as if it's 1971. Gold is selling for $35. This is the year Nixon breaks it from ties to the dollar. Gold prices start climbing. By 1975, it's hit $196. And by 1980, we're talking $850. Sure, you say, that I remember.
But maybe you also remember back then you could you could also make $27,700 per year and it was a pretty decent living. About as good as making $100,000 per year today.
You could also buy a house for $50,000 then and, just on an inflation basis, it would be worth $250,000 today. (In real estate terms, it might sell now for $500,000 or more.) And back then, you could retire on $270,000 in savings... and it would be as good today as being a millionaire.
So you can see, trying to compare yesterday's gold price to today's — on an even basis — is like trying to compare apples and armadillos!

In today's dollars, 1975 gold at $196 is more like $750 in the current market. And 1980 gold, the peak year at the historical price of $850, would now clock in closer to $2,176. And remember, this is what you get using only the most conservative market calculation of gold's worth. There are other, even more telling ways to value gold.

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