Wasn't it Mark Twain who said "there are lies and then there are damn lies" ?

[China Bull]

check this link to a Vanguard blog http://www.vanguardblog.com/2010.07.26/gold-rush.html

There are plenty of historical data and charts showing golds price, but this is the first time i've seen it from this perspective.

What to make of it in your opinion ?

[craigr]

Gold prices are going to move in the market for reasons we can't predict. Keep in mind that in the US the gold price was fixed by the government for most of the existence of this country (released in 1971) and this skews many of these historical analyses. For instance:

The inflation-adjusted price of gold was higher in 1871 than it was 100 years later in 1971.

Ok. But we had just ended the Civil War a few years prior and Lincoln printed a bunch of money making gold a more valuable asset to hold than greenbacks. It took nearly 20 years for the currency to settle back down again to the correct value.

Also it is clear that the price in 1971 for gold was well below market value because that's the year Nixon closed the gold window. Foreign governments were demanding gold payment for their dollars en masse. If gold was really the 1971 price it wouldn't have gone up several hundred percent over the next 10 years after this happened. Indeed, if the value of the dollar really was falling all these years to make gold prices go down so much, Nixon wouldn't have needed to close the gold window and foreign countries would have been happy to hold dollars as they would have been more valuable. Obviously this is didn't happen. The dollar was not gaining in strength relative to gold the prior few decades prior to 1971 despite what his chart is showing.

Going further, the government CPI has been radically changed many times in the past so it is dangerous to compare prior inflation numbers to what is used today to calculate the CPI.

This isn't a defense of the price of gold because it could crash tomorrow - we don't know. Just that these comparisons come up often and the data used is just as bad to conclude gold is priced too high as the gold bug's data is to show it is priced too low. This is why gold should be in a balanced and diversified portfolio and rebalanced when appropriate.

[LNGTERMER]

So, how best should one hold gold, in an ETF such GLD or physical form?
It seems there is no ideal form here. If we hold it in physical form then one cannot rebalance.
And, if ETF form then, one can be susceptible to WallStreet's manipulation such contango, which I never heard of till today. 

[craigr]

So, how best should one hold gold, in an ETF such GLD or physical form?
It seems there is no ideal form here. If we hold it in physical form then one cannot rebalance.
And, if ETF form then, one can be susceptible to WallStreet's manipulation such contango, which I never heard of till today.  ???

Many choose to do a hybrid approach. ETFs are sometimes the only real option people have and they are much better than owning no gold in a portfolio at all.

You want to have the best representation of physical gold bullion that you can and if an ETF is what you have, then use it. The other 75% of the portfolio is distributed across assets that can provide interest and dividends. The gold allocation is for circumstances that stocks and bonds cannot protect against.

[Pkg Man]

And, if ETF form then, one can be susceptible to WallStreet's manipulation such contango, which I never heard of till today. 

Contango is the usual condition in futures markets due to storage costs.  If it were not, them the  market must believe that the price of the commodity will fall in the future, and by more than the storage costs.  This is called backwardation, where the futures price is lower than spot. 

None of this is wall street manipulation, just the normal functioning of futures market.  As long as GLD holds gold and not futures contracts on gold, this is not an issue we need to concern ourselves with.