After a period of heavy inflation resulting from the COVID-19 pandemic, it’s not uncommon for precious metals investors to be curious about how much of an effect the devaluation of the dollar has had on gold’s continued move to all-time highs.
The answer is not a simple one, but a glance at the yellow metal's inflation-adjusted prices shows that gold could be staging a breakout compared to its inflation-adjusted peak in 1980, which averaged $2,553 an ounce in today’s dollars during the calendar year. The price of gold averaged $672 in 1980.
For the first time in its history, gold’s actual price surpassed $2,700 an ounce this week as it continues to produce consistent gains on a near-weekly basis.
Gold recently surpassed its inflation-adjusted all-time highs. (Source: Pretiorates.com)
That news could be digested either way for precious metals investors who may be growing wary of gold’s extreme year-to-date performance in 2024, during which prices for the metal increased more than 31%. Some investors may be concerned about gold reaching an all-time, inflation-adjusted peak, while others may take the news as a sign of a breakout that could lead to a parabolic move.
Plenty of analysts are continuing to call for higher prices, including staffers at Goldman Sachs, which recently raised its target to $3,000 an ounce, along with several other investment banks that are expecting a continued move higher.
Steve Kibbel, a certified financial planner and senior editor at InternationalMoneyTransfer.com, recently told CBS News, “Potential interest rate cuts and ongoing uncertainties in [other countries] could [also] drive up gold prices.”
This chart shows the total inflation experienced by decade in the U.S. economy. (Source: www.inflationdata.com)
Despite the recent breakout, gold is showing no signs of slowing down despite slowing inflation. That should only help its performance when adjusted for inflation, and Liberty Group founder David Hollander told CBS News last month he sees higher prices on the horizon.
“Even with cooling inflation and potential Fed rate cuts on the horizon, I think the core factors driving gold’s appeal — like economic uncertainty, geopolitical tensions and demand for safe-haven assets — are likely to remain strong,” he said.
Keith Weiner, CEO and founder of Monetary Metals, told CBS, “The stable yield on gold amidst … Fed rate cuts could further attract investors, making gold increasingly appealing compared to dollar-denominated assets.”
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