But there are other opinions too. Goldbugs on various websites have voiced the suspicion that the IMF was in no position to sell a sizable amount of gold as it has leased a good chunk of the yellow metal in its vaults. Had it had to recall these short positions the gold price would have gone through the roof as borrowers would have been forced to cover their short positions.
Gold Is the Second Best Investment Since 1971
Gold is also called the central banker's biggest enemy. Read Alan Greenspan's 38 year old essay linked above. Or read his speech from December 2002 when he said that "it was the case that the price level in 1929 was not much different, on net, from what it had been in 1800. But, in the two decades following the abandonment of the gold standard in 1933, the consumer price index in the United States nearly doubled. And, in the four decades after that, prices quintupled."
President Richard Nixon closed the so called gold window on August 15, 1971. Until then an ounce of gold had cost 35 dollars since Roosevelt had set this price on January 31, 1934. From 1837 to 1933 an ounce of gold was worth 20.67 dollars. This was also the period Greenspan referred to as the period of stable prices.
Gold has been the universal currency for 6000 years. The last 34 years might once be seen as a blip in history.
With a total return of 1,123 percent or 13.5 percent annually since 1971 it is still one of the best investments, outperforming bonds, but not stocks, which performed marginally better with a rise of 1,135 percent, based on a Dow standing at 850 in 1971. But this will be the case again once the Dow falls below 10,300 points. Remembering that there has been no period in history where the stock market managed to rise during a sustained rise of interest rates this point may not be too far away.
Again adhering to Greenspan's rule of thumb that the gold price is a leading indicator for inflation, don't put your bets on a favourable inflation reading on coming Wednesday.