The real real price of gold

Discussion of the Gold portion of the Permanent Portfolio

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ochotona
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The real real price of gold

Post by ochotona » Fri Jan 12, 2018 10:44 am

I am thinking about computing the inflation adjusted price of gold, but not using CPI. I wonder if CPI is underestimating inflation.

There is another inflation gauge from the NY Fed, the UIG. I'm going to give that one a try. Should be interesting.
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Cortopassi
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Re: The real real price of gold

Post by Cortopassi » Fri Jan 12, 2018 11:37 am

What is inflation anyway? I mean that seriously.

Inflation to a family of 4 with two kids going to college and living in a house with ever increasing property taxes is going to be completely different from a family of 4 with kids going directly into the workforce after HS and renting.

Here's two clips from the SAME article:

***Core inflation is the price change of goods and services minus food and energy. It represents the most accurate picture of underlying inflation trends.

***Over time, inflation robs the economy of growth potential. That's because people spend more and more on essentials, like food and gas, and less on other consumer products.

Huh?!?!
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ochotona
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Re: The real real price of gold

Post by ochotona » Fri Jan 12, 2018 5:19 pm

Inflation is an aggregate statistic, doesn't mean as much for individuals and families. Darn the data series doesn't have an index...
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sophie
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Re: The real real price of gold

Post by sophie » Fri Jan 12, 2018 5:36 pm

It looks like the UIG doesn't differ much from CPI in the long run. You probably wouldn't get much different results from just using CPI. Did you check into the MIT Billion Prices Project?
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Mark Leavy
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Re: The real real price of gold

Post by Mark Leavy » Fri Jan 12, 2018 10:04 pm

MachineGhost made an argument awhile back that the true rate of inflation was the T-Bill rate. I struggled with that - but was unable to refute it.
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ochotona
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Re: The real real price of gold

Post by ochotona » Fri Jan 12, 2018 10:33 pm

sophie wrote:It looks like the UIG doesn't differ much from CPI in the long run. You probably wouldn't get much different results from just using CPI. Did you check into the MIT Billion Prices Project?
BPP is a pretty short data series... from 2008 to 2015. During that period it show little inflation, like CPI. Inflation reflected by the 90 day T-Bill rate? But... that's almost set by the Fed. Hmmm
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Re: The real real price of gold

Post by technovelist » Sun Jan 14, 2018 8:55 pm

ochotona wrote:I am thinking about computing the inflation adjusted price of gold, but not using CPI. I wonder if CPI is underestimating inflation.

There is another inflation gauge from the NY Fed, the UIG. I'm going to give that one a try. Should be interesting.
There's a very simple way to compute the inflation-adjusted price of gold.

A $20 double eagle is $20 in gold. ;)
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ochotona
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Re: The real real price of gold

Post by ochotona » Sun Jan 14, 2018 9:21 pm

technovelist wrote:
ochotona wrote:I am thinking about computing the inflation adjusted price of gold, but not using CPI. I wonder if CPI is underestimating inflation.

There is another inflation gauge from the NY Fed, the UIG. I'm going to give that one a try. Should be interesting.
There's a very simple way to compute the inflation-adjusted price of gold.

A $20 double eagle is $20 in gold. ;)
In what, 1892 US Dollars?
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Re: The real real price of gold

Post by technovelist » Sun Jan 14, 2018 10:03 pm

ochotona wrote:
technovelist wrote:
ochotona wrote:I am thinking about computing the inflation adjusted price of gold, but not using CPI. I wonder if CPI is underestimating inflation.

There is another inflation gauge from the NY Fed, the UIG. I'm going to give that one a try. Should be interesting.
There's a very simple way to compute the inflation-adjusted price of gold.

A $20 double eagle is $20 in gold. ;)
In what, 1892 US Dollars?
In dollars of the standard weight from 1841-1932, other than during a couple of wars. (http://onlygold.com/Info/Historical-Gold-Prices.asp)
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ochotona
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Re: The real real price of gold

Post by ochotona » Mon Jan 15, 2018 5:46 am

Methinks Tricky Dick Nixon did something tricksterish which was worse than if the Soviets had done it themselves.
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Re: The real real price of gold

Post by Kbg » Wed Jan 24, 2018 1:19 pm

No index is perfect...but CPI is pretty dang good and has correlated/tracked very well with multiple alternatives in multiple academic studies.

One can make it hard for themselves or have a theory...personally I think there are better things to spend limited mental bandwidth on analyzing than the CPI. Really, it’s good enough.
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