The news of the House passing the Obama $825 Billion Stimulus Package sent the price of gold over $900 an ounce. This seems to be the trend lately…each month a new higher trading range for gold prices.

Government Spending Driving Inflation Fears

In a Bloomberg article market watchers confirm inflation fears,

“Central banks are going to start printing money and it’s not an ideal place for investors to be,” said Joel Crane, a metals strategist at Deutsche Bank AG in New York. “People don’t have faith in currencies at the moment. There is still an underlying faith that gold will go higher.”

I would consider this a reasonable conclusion as our Fed has never been very good at stepping on the gas or the brake in just the amount necessary. Monetary policy is a rather blunt instrument so this is to be expected.

Devaluation of fiat currencies world wide is gaining ground do to all of this spending and printing. Bloomberg again puts it like this,

Gold will rise in the longer term, “based on a growing distrust of all paper currencies,” said Adrian Day, president of Adrian Day Asset Management in Annapolis, Maryland. “People are turning to the one true money, which can’t be created by governments and holds its value.”

I’m with Mr. Day…I don’t trust currencies including the US dollar right now. So convert your willowing US dollars into physical gold and watch it grow.

Happy Investing!

Don’t get me wrong, I hate Obama’s choice for Treasury Secretary in Tim Geithner, but it really helps gold prices. Geithner as Treasury Chief has had a boosting affect back when his name was first floated and again this week as his confirmation was pretty clear.

Gold Price Milestones and Tim Geithner

Back on November 21, 2008 when Obama announced his choice, Bob Pisani made note of the Geithner effect saying,

“Particularly strong throughout the day were gold stocks, including AngloGold Ashanti, Gold Fields, and Barrick Gold, each of which closed up 30% on the day. Gold stocks strengthened earlier on the heels of gold prices crossing $800 for the first time in a month.”

And here we are again…during the Senate confirmation hearings where it becomes clear Geithner will get confirmned…even with a strong dollar, gold prices hit $900 an ounce.

So it could be coincidence…or it could be that everyone knows a Geithner Treasury is going to be bailout happy. Since Obama will get all the funding bills he asks for through Congress, Mr. Geithner will have a lot of money to print so he can give it away.

And therein lies the cause of the gold price spikes…fear of inflation.

Geithner = Bailouts, Bailouts = Inflation, Inflation = Higher Gold Prices

Don’t miss out…buy physical gold while it’s still cheap.

Happy Investing!

The historical gold price really did not change until President Nixon took the US currency off the gold standard completely in 1975. Every year since the price of gold has fluctuated dramatically compared to the hundreds of years of stability prior.

The gold price chart below shows going back to 1833 and coming forward to the present, the price of gold as an average for the year. I will maintain this chart moving forward adding the average spot gold price at the end of trading on the last day of each year starting with 2008…so check back to see updates.

Historical Gold Price Chart

See NMA.org Chart Below for Average Spot Price for the Year.

Year Price Year Price Year Price Year Price
1833-49*18.93 1901 18.98 1953 34.84 2005 444.74
1850 18.93 1902 18.97 1954 35.04 2006 603.46
1851 18.93 1903 18.95 1955 35.03 2007 695.39
1852 18.93 1904 18.96 1956 34.99
1853 18.93 1905 18.92 1957 34.95
1854 18.93 1906 18.90 1958 35.10
1855 18.93 1907 18.94 1959 35.10
1856 18.93 1908 18.95 1960 35.27
1857 18.93 1909 18.96 1961 35.25
1858 18.93 1910 18.92 1962 35.23
1859 18.93 1911 18.92 1963 35.09
1860 18.93 1912 18.93 1964 35.10
1861 18.93 1913 18.92 1965 35.12
1862 18.93 1914 18.99 1966 35.13
1863 18.93 1915 18.99 1967 34.95
1864 18.93 1916 18.99 1968 39.31
1865 18.93 1917 18.99 1969 41.28
1866 18.93 1918 18.99 1970 36.02
1867 18.93 1919 19.95 1971 40.62
1868 18.93 1920 20.68 1972 58.42
1869 18.93 1921 20.58 1973 97.39
1870 18.93 1922 20.66 1974 154.00
1871 18.93 1923 21.32 1975 160.86
1872 18.94 1924 20.69 1976 124.74
1873 18.94 1925 20.64 1977 147.84
1874 18.94 1926 20.63 1978 193.40
1875 18.94 1927 20.64 1979 306.00
1876 18.94 1928 20.66 1980 615.00
1877 18.94 1929 20.63 1981 460.00
1878 18.94 1930 20.65 1982 376.00
1879 18.94 1931 17.06 1983 424.00
1880 18.94 1932 20.69 1984 361.00
1881 18.94 1933 26.33 1985 317.00
1882 18.94 1934 34.69 1986 368.00
1883 18.94 1935 34.84 1987 447.00
1884 18.94 1936 34.87 1988 437.00
1885 18.94 1937 34.79 1989 381.00
1886 18.94 1938 34.85 1990 383.51
1887 18.94 1939 34.42 1991 362.11
1888 18.94 1940 33.85 1992 343.82
1889 18.93 1941 33.85 1993 359.77
1890 18.94 1942 33.85 1994 384.00
1891 18.96 1943 33.85 1995** 383.79
1892 18.96 1944 33.85 1996 387.81
1893 18.96 1945 34.71 1997 331.02
1894 18.94 1946 34.71 1998 294.24
1895 18.93 1947 34.71 1999 278.98
1896 18.98 1948 34.71 2000 279.11
1897 18.98 1949 31.69 2001 271.04
1898 18.98 1950 34.72 2002 309.73
1899 18.94 1951 34.72 2003 363.38
1900 18.96 1952 34.60 2004 409.72

*Prices from 1883-1994, World Gold Council. Taken from Timothy Green’s Historical Gold Price Table , London prices converted to U.S. Dollars.
**Prices from 1995-2007, Kitco.com, based on the London PM fix.

Chances are you’ll need the data sometime in the future, so you can use the “Bookmark” button at the bottom of the post to store this page in your “Favorites” or bookmarks.

Happy Investing!

I have often used the common tale of the “good suit” to explain the price of gold and it’s steady increase is really the story of US dollar devaluation…or what economists called inflation. I have now found a video that does a better job.

US Dollars Inflation Explained

The “good suit” story goes like this:

The cost of a good suit in 1920 was $20, about the same as an ounce of gold. Today, the cost of a good suit is about $800, about the same as an ounce of gold. So you see gold held it’s buying power over time while the US dollar did not.

This loss of buying power or devaluation of the US currency is called inflation.

Inflation is a hidden tax on the American public. Erosion of your wages paid in US dollars means you’ll have to work more to maintain the same standard of living. Politicians and economists complain the American public nevers “saves’ enough. As a matter of fact is was well publicised in the mainstream media recently when the American savings rate actually turned negative.

Well, the American public is smart not to save US dollars. Spend US dollars bfore they lose value is right way to go. I’m not advocating spending more than you earn, but holding on to dollars is not a wise strategy over the last 50 years.

Gold Price vs. Dollars Inflation Video

Enjoy…

I have always believed the Federal Reserve and it’s Chairman had other objectives when taking office than simply “stabilizing the business cycle” or “fighting inflation”. As in all Orwellian dramas, the stated objective is usually the polar opposite of it’s nomenclature. This Federal Reserve with it’s current Chairman, Ben Bernanke, is no exception.

Currency manipulation and by proxy then, gold price manipulation are right up Bernanke’s alley. As we all know the price of gold and the strength of the dollar go hand-in-hand…inversely, of course. We all also know the way Bernanke and company print so many US dollars to pay for wars and bailouts…it’s call the US Treasury market.

A quick overview how money is created out of debt in our system…

1. The Treasury needs money so it issues Treasury bonds…or debt which requires a repayment with interest.
2. The buyers of the Treasury bonds, both foreign and domestic, transfer US dollars to the Treasury which deposits these payments.
3. The Treasury is now responsible for repayment of both principal and interest on the bonds issued. It is said this system is the “back-door” to pay the “cost of government” politicians are unwilling to ask the taxpayers for in the form of more taxes. It is the “line of credit” for Congress and a direct addition to the National Debt which now stands at over $10,000,0000,000,000.
4. We will pay back that debt with interest and maintain our standing in the world, but it is becoming increasingly worrisome. The only real solution is to payback all of the interest and principal payments with “devalued” dollars. So, sooner or later we will have to “inflate” the US dollar and some say keep inflating it so our creditors get less and less for buying our Treasuries.
5. This is where Ben Bernanke steps in since the Federal Reserve prints the US dollars, controls the money supply, and by proxy, it’s value. Increase the money supply decrease the value, decrease the money supply, increase the value.

Ben will inflate the currency when necessary and my guess it will be an on-gong endeavor for years to come. Federal Reserve Chairman in the past have at least given lip service to a “strong dollar” policy, but not Mr. Bernanke. He stated in his famous 2002 speech on deflation, a “helicopter drop” of more money could be used if necessary. He became know by detractors as “Helicopter Ben” after that speech.

Are we not in a “deflationary period” right now?

Won’t Ben need to fire up his helicopters soon?

Hasn’t he already “dropped” $700 Billion with the lastest financial bailouts?

This is where the price of gold gets a kick. If Ben does what he thinks “needs to be done” a weaker dollar is the result. A weaker US dollar means the price of gold goes through the roof.

James Conrad on SeekingAlpha writes,

“Anyone who reads the written works of our Fed Chairman knows that Bernanke’s long term plan involves devaluing the dollar against gold. This is the exact opposite of most prior Fed Chairmen. He has overtly stated his intentions toward gold, many times, in various articles, speeches and treatises written before he became Fed Chairman. He often extols the virtues of former President Franklin Roosevelt’s gold revaluation/dollar devaluation, back in 1934, and credits it with saving the nation from the Great Depression. According to Bernanke, devaluation of the dollar against gold was so effective in stimulating economic activity that the stock market rose sharply in 1934, immediately thereafter. That is something that the Fed wants to see happen again.”

Since Congress can’t seem to steer clear of war expenditures, cease funding every private sector bailout, and eliminate the mentality we can “borrow and spend our way” out of every mess we create…the price increases of gold are baked into the cake.

As James Conrad said in the same December 4, 2008 SeekingAlpha story,

“It won’t matter much if you purchase gold at $750, $800, $850, $900 per ounce, or even much higher. All of these prices will be looking extraordinarily cheap in a few months. The price of our pretty yellow metal is about to explode, and it is probably going to soar, eventually, to levels that not even most gold bugs imagine.”

I think he’s right…so get started today…I’ll help…click the link.

Happy Investing!

I don’t put much sway in what “pundits” say because I know they have an agenda…Jim Cramer taught me that much. However a report out today by Citigroup analysts says gold prices will hit $2,000 an ounce due to the global financial crisis. I find this significant because they see this happening in 2009 and this supports Jim Rogers expectation for gold next year as well.

Unlike Rogers, these analysts credit the rise of the price of gold to the political reaction to the financial crisis which is likely to cause more problems than they solve. The basic assumption is the over-reaction to banking and financial meltdowns is either a hyper-inflation creating “bailout reaction” or a full blown depression should those measures not work as expected…either option improves the price of gold.

The Telegraph reports,

“They are throwing the kitchen sink at this,” said Tom Fitzpatrick, the bank’s chief technical strategist.

“The world is not going back to normal after the magnitude of what they have done. When the dust settles this will either work, and the money they have pushed into the system will feed though into an inflation shock.

“Or it will not work because too much damage has already been done, and we will see continued financial deterioration, causing further economic deterioration, with the risk of a feedback loop. We don’t think this is the more likely outcome, but as each week and month passes, there is a growing danger of vicious circle as confidence erodes,” he said.

“This will lead to political instability. We are already seeing countries on the periphery of Europe under severe stress. Some leaders are now at record levels of unpopularity. There is a risk of domestic unrest, starting with strikes because people are feeling disenfranchised.”

I am bullish on gold prices for the next year and I’m not leaning on analysts but my own eyes. You should do the same before you invest. However, we all need a dispassionate facilitator to keep our investment goals clear in face of troubled times.

We can help…click on the “Get Started” link to learn more…

Good Luck and Happy Investing!

This page will hold a ticker on the current gold price updated live. This is for you to check in occasionally on the movements in the current price of gold, but not to make trading decisions with.

Just like in the stock market, there is a “bid-ask” spread when it comes to buying and selling gold bullion or gold coins. If you follow my methods for owning gold, you’ll stay away from the coins since the coins have a premium built into the bid-ask spread…and lately that spread is too great over the bullion. So until that corrects…bullion is a better buy.

Of course, there are those who buy gold in coin form so they can take possession of it…and hide it in their back yard or under their bed…and my guess is those camps are growing…not dwindling. I don’t hold the opinion financial Armageddon is at hand (nor do I want to worry about safe storage of my gold), but I do hold that the recession, the housing bust, and the financial crisis will be a lot worse than expected.

When everyone figures that out…the price of gold will skyrocket. Of course, you need to take a position before it becomes obvious to the world. I can help…click the link, Get Started! today!

Good Luck!
Rob K. Blake
The Gold Insider