The real price of gold, adjusted for inflation, is high. Historically, a high real gold price has been associated with low inflation-adjusted gold returns over the following ten years. Additionally, historically, the 10-year realized inflation rate has had virtually no impact on the 10-year nominal and real returns of gold. An influx of investment in gold (from gold ETFs, Costco buyers, “dedollarized” central banks, and perhaps others) has apparently doubled the real price of gold relative to the period preceding the influx. Today’s gold dilemma is yesterday’s gold dilemma: Did an influx of gold buying usher in a new era of permanently higher real gold prices, ” this time it’s different” or is this just the latest cycle of “wash, rinse, repeat” that implements meaningful change? fall in real gold prices?
It is a new working document by Claude B. Erb and Campbell R. Harvey.
