Friday, September 18, 2009

Turk skewers anti-gold propagandist

The Economist and Financial Times are not known for friendly commentary on the gold market, James Turk tells us, and a recent Lex column in FT illustrates his point. Inserting his comments in brackets while italicizing Lex's statements, Turk writes:
Stories of those who preserved their wealth or escaped hunger in decades past by hoarding precious metals when their governments set the printing-presses loose provide gold bugs with a compelling historical narrative. [Yes, and one that is very relevant today given what governments and central banks around the world are doing to national currencies by again setting the printing presses loose.]

But the US is not Weimar Germany [Not yet, but wait a few months.] and, in spite of interest rates that make gold ownership cheap [Which is only one of gold’s many advantages at the moment], the opportunity cost of owning it is still unattractive in the long-run. [Complete rubbish. Gold has appreciated at double-digit rates on average this decade against all of the world’s currencies, and achieved that without counterparty risk. Gold is doing what money is supposed to do - preserve purchasing power.]
Read the full article, and buy gold while it's still cheap.

How cheap? Turk explains:
Adjusting for inflation, it takes more than $2,300 to purchase today what $850 purchased in January 1980, using the US government’s current CPI calculator. However, the US government has since amended its CPI calculator numerous times. Fortunately, makes available the same CPI calculator used when the Carter administration haplessly watched the gold price soar nearly three decades ago. Using this Carter-era calculator,<><> it takes over $6,300 today to match $850 of January 1980 purchasing power.

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