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Tags: Inflation | gold | dollar | power

Inflation: The Slow Erosion of the Dollar’s Buying Power

Mike Fuljenz By Tuesday, 01 May 2012 06:48 AM EDT Current | Bio | Archive

The Federal Reserve took over control of the value of the dollar 99 years ago, in 1913.

Since then, the value of the dollar has fallen by more than 98 percent, in terms of gold. Gold has risen from $20.67 per ounce to above $1,660.

Since the 1960s price of $35, gold has risen almost 50-fold. President Johnson took silver out of our coins in 1965. Since then, inflation has really been our nemesis.

Anybody over 60 remembers what it cost to buy daily necessities and a few luxuries in 1962.

From a variety of sources, here are some typical prices from 1962 and their equivalent price in 2012:

Article continues below chart:

Click on chart to enlarge

As you can see, gold and silver have risen far faster than most consumer items and inflation since 1962.

Inflation is Coming Back so Buy Gold Before it Hits $2,000

Newmont Mining CEO Richard O’Brien told CNBC viewers to buy gold before it reaches $2,000 and inflation “comes roaring back.”

O’Brien sees flat production and escalating costs as being inhibitors to gold supply, adding to upward price pressures on gold. O’Brien didn’t predict a timetable for $2,000 gold but said, “If you think about the next year, the next three years, the next five years we’re in an upwardly sloping gold price environment.”

He said currencies are “going to continue to be cheap, and when inflation comes, it’s going to come roaring back and gold will look like an asset class that people should own. Buying it now is the best time to buy it.”

More Bullish Quotes on Gold in 2012

According to a survey at the Bloomberg Link Precious Metals Conference in New York, the average projected price for gold at the end of 2012 was $1897 per ounce, an annual gain of over 20 percent.

Here are some quotes from the analysts at the conference: Rachel Benepe, fund manager at the First Eagle Gold Fund in New York, said: “Gold is the ultimate downside protection…. The future is uncertain, and we have no idea how we’re going to get through with this situation.”

Martin Murenbeeld, chief economist at Toronto-based Dundee Wealth, said: “Gold has become an investment, an asset class, and over time, we are only going to be building it up. The central banks are holding gold because they are not sure if the euro will remain five years later.”

Michael Pento, president of Pento Portfolio Strategies in New Jersey, correctly predicted the annual high price for gold for the last three years. He forecasts $2150 by the end of 2012.

Economist Editor Loses Faith in Paper Money, Recommends Gold

Matthew Bishop, U.S. Editor of The Economist, told Wall Street Journal TV that “people have lost faith in the 20th century religion of government-backed fiat money.” He revealed that he has become an agnostic/atheist with regard to his former belief in government-backed money because he expects that they plan to debase the “paper dollar” and “paper euro” “in a big way.”

Bishop said that gold becomes one of the “alternative religions” in a currency-debasement environment. He has authored a new book called “In Gold We Trust?”

The revelation is particularly notable because The Economist traditionally has held a distinctly Keynesian tone with an anti-gold bias.

Central Bank Gold Buying Trend Continues Upward

After more than two decades of gold-dumping by the world’s central banks, in 2007 the tide turned, and the bankers started bulking up the piles of gold in their vaults. According to World Gold Council estimates, central bank net purchases of gold rose to 440 tonnes last year, compared to 77 tonnes in 2010, a fivefold increase.

About the Author: Mike Fuljenz

Mike Fuljenz is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He is also the editor of the NLG award winning Michael Fuljenz Metals Market Weekly Report.  Discover more by Clicking Here Now.

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Tuesday, 01 May 2012 06:48 AM
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