Gold at New All-Time High

After 28 years, the price of gold has finally reached an all-time high. Although, inflation has increased by about 170% since then so gold needs to make it to $2300 an ounce to reach an inflation-adjusted high.

Update: Oil just peaked over $100 a barrel for the first time. I should remind everyone that investing in commodities has almost always been a loser’s game. The price of oil, for example, tends to be marked by sharp spikes.
A few weeks ago, Megan McArdle wrote:

One of the things that I was struggling to get across at a dinner a few weeks ago is how discontinuous prices on inelastic goods can be. That is, a few percentage points increase in demand against a relatively fixed supply doesn’t produce a few percentage points increase in price: it can produce huge spikes. That’s not intuitive; we feel as if prices and demand should grow at approximately the same rate. But people in the world have a lot of spare income they can use to bid up the price of oil; the speed with which its price is increasing is a measure of just how useful the stuff is.

If you want to know how well commodities have done, check out this chart of the CRB Index adjusted for inflation:

Posted by Eddy Elfenbein on January 2nd, 2008 at 11:30 am

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