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Gold and silver are even cheaper than I thought

Commentaries & Views

I recently wrote that, in real terms, gold and silver have yet to reach new highs. I’ve also written that in the most real terms, gold and silver stocks are still cheap. In adjusting for inflation in this analysis, I used official Bureau of Labor Statistics (BLS) inflation numbers. Can’t say I was cherry-picking the data to make my case look good, that way… but I question the validity of all the games the BLS has played with its stats.

If you you’re as skeptical as I am about this, you must be wondering how things look truly and fully adjusted for inflation.

Unfortunately, even the best estimates for that are just estimates, so we may never know.

But we can get closer, at least, with data. John William’s numbers are not some extreme libertarian answer to the BLS’ consumer price index (CPI). They are simply inflation reported the way the US government used to, before it changed the rules of the game.

So, how do gold and silver look in these “more real than CPI-adjusted” prices?

Better sit down for this…

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I’m hesitant to say too much about this, given how extraordinary the previous highs are.

I had been thinking that we might see gold priced in tens of thousands of US dollars if the USD went into true hyperinflation. But according to the way the BLS used to calculate inflation, gold reached about $50,000 (in 2020 dollars) back in 1980. Silver almost hit $3,000.

The mind balks.

But let’s say gold and silver never revisit those lofty peaks. What are their average prices since Nixon took the USD off the gold standard in 1971, freeing the price of gold? Well, in the almost 50 years since then, adjusted via Shadow Stats data, they are:

  • Average gold price in 2020 USD = $9,612.04.
  • Average silver price in 2020 USD = $238.88.

I’m pretty sure that if I were to set these as my price targets for gold and silver, lots of people would conclude that I’ve taken to wearing tinfoil hats.

Let’s just call this a thought experiment. What would it look like if gold and silver reverted to their 50-year averages? Now you know.

What would it look like if gold and silver went to real all-time-highs? Gives meaning to the phrase, “to the moon.”

My mind still balks. I’m not going to use any of these numbers as targets or projections.

But now, when people ask me if gold and silver have gotten pricey, my answer is a clear “no.” Not in real terms.

Whatever else we might conclude from all this, there is certainly plenty of potential for gold and silver to rise much, much higher.

That’s not a promise. It’s a possibility—one I don’t want to miss out on.

And I’m investing accordingly.

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Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.