How much are PMs over/underpriced in the past 40 years?

[JohnA1]

This has been pestering me for quite some time, looking for a rough estimate at least. Easier to find figures in USD, and my feeling is that UK figures would be quite similar

I used 1980 as a starting point, since prices started going AWOL back then and the govs took action and started redefining CPI to make it look lower than it really was. Until 1990 the old/new CPI figures were relatively close, but afterwards they started diverging more and more. After 2000 the real CPI is often twice the official figure. This all adds up year after year.

According to 'Shadow Stats' USD in March 1980 had 20 times the purchasing power of the USD of March 2023, a handy, round figure.

March 1980 gold was $550, March 2023 $2000. However, in 1980 dollars it is now only one-twentieth of that, $100. Therefore it is now 5.5x cheaper compared to 1980. Hmmm....

March 1980 silver was $19, now it is $24.  However, in 1980 dollars it is now only $1.2 (one twentieth of 24), so it is now 15-16x cheaper than 1980. Wow, didn't expect that! Applying the official CPI figures silver appears to be around 3x cheaper nowadays, but in reality it is quite a bit more. Hmmm..

Platinum comes out 10x cheaper today compared to 1980 (or 5x if you pick a very brief price spike it had March 1980)

I've done the same with UK average house prices, back in 1980 it was 19000 GBP, now around 400K GBP

Applying the same CPI correction factor (I know, it's from the States, but I don't think the UK figure would be much different) the average UK house price turns out to be around £20K of 1980, so pretty much flat. This feels right broadly, at least to me.

The bottom line is that gold is probably over 5x cheaper now compared to 43 years ago, and silver over 15x. As (very) rough estimates I find these quite interesting. They might give an idea how far we are from 'fair' pricing (assuming pricing was close to fair in 1980)

Food for thought, eh🤓

 

Edited April 22, 2023 by JohnA1

[HonestMoneyGoldSilver]

Edited April 22, 2023 by HonestMoneyGoldSilver

[flyingveepixie]

PMs are manipulated by central banks and governments to keep the spot price lower than it should be.  In reality there is no such thing as paper or virtual silver and gold is there, neither exists in the real world, (digital gold ..?? WTF is that lol...😆)  yet the paper silver market is 300+ times bigger than the physical silver market.  I think this goes some way to explaining your findings.

Being widely regarded as 'real' money, the true value of physical PMs and other commodities never really moves at all. It's fiat currencies that move and change as they are endlessly devalued thanks to currency creation via fractional reserve lending, and the general dodgy workings and gerrymandering of dodgy central bankers and the parasitical elite who control the financial system.

Edited April 23, 2023 by flyingveepixie

[JohnA1]

My point is that the 'price' graphs people typically use are very skewed to the point of being deceptive.

Even the 'inflation adjusted' price graphs are way off the mark (skewed upwards) from 1980 onwards. From 2000 onwards the 'inflation adjustment' is grossly overestimating the current price of PMs.

Priced in 1980 USD, using official inflation adjustment gold has quadrupled in price since March 2000. Well according to shadow stats it has dropped by 20-odd percent!

Similarly, using official inflation adjustment silver has tripled since March 2000. According to shadow stats it has dropped by a bit less than half.

 

Let's take it from March 2008. Adjusting for official inflation gold has gone up by a bit over 30%. With shadowstats it has dropped to half!. Silver is meant to have been flat, yet by shadowstats it has dropped down to one third!

Take it from March 2016. With official inflation figures gold has gone up by almost 20%, yet by shadowstats it has gone down by 20%. Silver has officially gone 'up' by 20% when in reality it has gone down by almost 30%

 

PMs have been dropping in price for years now when realistic inflation figures are used

[sixgun]

Fiat has been devaluing since there was fiat. This is what it does but b/c it allows governments to print money they will do somersaults to make it look like their currency is not falling in value. i would argue it is fiat that is manipulated - not gold. An ounce of gold is worth an ounce of gold. As JP Morgan said, gold is money and everything else is credit. When fiat goes to nothing all these mental gymnastics trying to get your head around what the 'true price' of gold should be won't matter. 

You better bet is to plot gold against a tangible. You could plot the gold price against the SPX index over the years. Does this give a better picture for you?

Edited April 23, 2023 by sixgun

[SilverPlatinum]

6 hours ago, sixgun said:

Fiat has been devaluing since there was fiat. This is what it does but b/c it allows governments to print money they will do somersaults to make it look like their currency is not falling in value. i would argue it is fiat that is manipulated - not gold. An ounce of gold is worth an ounce of gold. As JP Morgan said, gold is money and everything else is credit. When fiat goes to nothing all these mental gymnastics trying to get your head around what the 'true price' of gold should be won't matter. 

You better bet is to plot gold against a tangible. You could plot the gold price against the SPX index over the years. Does this give a better picture for you?

well said......