"There are numerous people in the financial market media who point to gold as an underperformer because if it had kept up with inflation the price would be $2400 an ounce. It is efforts by The Gold Cartel, like today, which is the reason why."

You are right in thinking that the gold price suppression scheme has held back gold's rate of gain. However, I would also note that the claim that gold has lagged inflation requires that we allow gold's critics to cherry pick the starting point of the calculation.

To be specific, they are using gold's former all-time high of $887.50/oz made in January 1980 as their starting point. To verify this, go to the CPI calculator at http://www.minneapolisfed.org//. Plug in 1980, 887.50, and 2011 in the first three blanks, and hit calculate.

When you do, you will find that the inflation-adjusted 1980 peak gold price, when extrapolated to the present, becomes $2400/oz, just as gold's critics claim. That price, of course, is considerably above yesterday's peak gold price of $1610/oz. Hence if we use 1980 as our starting point, we find that gold has not kept pace with inflation.

Using gold's 1980 peak price, however, is blatant cherry picking, and is unfair to gold. A vastly more reasonable starting point would be Aug. 15, 1971, when Nixon abandoned the last vestige of the gold standard, thereby allowing the dollar price of gold to fluctuate.

Using that date, we plug in 1971, 35, and 2011 into the CPI calculator, and hit calculate. Result:
now we find that if gold had exactly kept pace with inflation, its price would be a mere $192.64/oz, which is far below yesterday's peak gold price of $1610/oz. Hence if we use 1971 as our starting point, we find that gold has outpaced inflation by a large margin.

Exactly how large is that margin? Well, gold has risen from $35/oz to $1610 oz since 1971, which is a 46-fold increase. To find its average annual percentage gain, go to the interest rate calculator at http://www.moneychimp.com/calculator/discount_rate_calculator.htm. Plug in 35, 1610, and 40, and hit calculate.

Result: you will find that gold's average annual percentage gain over the 40 years that it has been permitted to fluctuate is 10.04%. By way of contrast, during that same interval the CPI is up only 5.5 times. (Plug 1971, 1, and 2011 into the CPI calculator to verify that figure.) Therefore the CPI's average annual percentage gain from 1971 to the present is 4.35%. (Plug 1, 5.5, and 40 into the interest rate calculator to verify.) That means gold has outpaced inflation by an average of 10.04 - 4.35 = 5.69% per year for the last 40 years.

Bottom line: gold has beaten the pants off of the CPI, if you measure its gains over the entire interval during which its price has been free to fluctuate.

(And it has also beaten the pants off of the Dow, in case you are interested. :-) Regards, Mitchell Jones
mjones@21cenlogic.com