LIVE GOLD PRICE

With the topic of gold prices on the front pages of the financial press, The Wall Street Journal chimed in today on where the price of gold might be headed in the future. Curiously, the WSJ, using the work of Societe Generale’s analyst Dylan Grice, penned an article titled, “Gold prices: $6,300 by 2065?” - missing and misrepresenting the insightful work of the SocGen analyst.

The Wall Street Journal article cites that if U.S. inflation runs at a 3.3%, its average over the last century, then the gold price would hit $6,300 by 2065. The problem with the article is that Grice’s research has nothing to do with price inflation - and everything to do with monetary inflation. At risk of sounding condescending, the ignorance of the financial press with respect to the distinction is staggering. Grice’s research concluded that in order for the gold reserves of the United States to fully back the entire U.S. monetary base, a gold price of $6,300 would be necessary.

The Wall Street Journal’s focus on a historical 3.3% price inflation rate that would lead to a case which “gold ought to hit the level by 2065” is irrelevant with respect to Grice’s work. Grice states that to back the current U.S. monetary base fully with gold reserves, the gold price would have to be $6,300 TODAY - not in 2065. While clearly monetary inflation inevitably leads to price inflation, the two are not the same thing. The Wall Street Journal should understand this and not confuse their readers with an extrapolation of a price inflation rate to derive a gold price target 55 years in the future - and pen an article that misses the essence of their subject’s analysis.