Gold and the Dollar: Now There's a Relationship

"I have sworn, upon the altar of God, eternal hostility to all forms of tyranny over the minds of men."
- Thomas Jefferson

If you're going to be a curmudgeon snarling at the world, go the whole way and borrow from a genuine Hall of Famer, one who didn't hit the steroids, Thomas Jefferson. I started to wonder if I had taken one too many cranky pills myself after my last two articles on the statistically demonstrable non-relationship between the dollar and both stock and bond prices.

Then I received a phone call from a reporter at another financial Web site who wanted to talk about gold. Specifically, the scribe (can you inscribe in HTML?) wanted to know why its price had risen and whether it was too late to buy. The answers were not simple, but they were direct. The price of gold or any other physical asset can rise if the cost of holding it is less than the expected increase in inflation. Also, the U.S. dollar price of gold can rise simply by an absolute depreciation in the value of the currency: If each greenback is worth less, it will take more of them to buy an equivalent amount of gold. ...