Sunday, December 20, 2009

Gold and Silver versus Money In The Bank

here is a chart of the gold price divided by the 'Barclays Capital Cash Composite' going back to 1980.



the cash composite represents the compounded return of holding an interest bearing deposit, so it seems like an appropriate 'deflator' to measure the price appreciation (or lack thereof) of a non-yielding asset like gold.

if nothing else, the above chart provides a 'reason' for the recent pullback in bullion prices. notice how the recent high approached the level of the 1987 high. the 1987 top might be considered the 'B' of the overall ABC bear market.

and here is a 'deflated' chart of silver prices since 1981: