patrick.net

Patrick says

Can someone explain this graph?

The key here is "real rates"; i.e., inflation-adjusted. If inflation is high, bond rates net inflation plummet, since bonds lag inflation. Gold prices in general follow asset prices, which are the first to rise before general consumer price inflation; i.e. asset price inflation is a leading indicator of general inflation (often by multiple years in advance).

Look at the late 1970's - gold shot up as well has housing prices. Then the Fed put interest rates close to 20% (which was much greater than the inflation rate, so "real" rates skyrocketed) and crashed the banking system, the housing market, gold, and the industrial economy.

"Austin cookie delivery firm Tiff's Treats is branching out from chocolate chips to gold bullion. Riding a wave of global interest in the precious metal, the new initiative is a way for the cookie delivery company to expand its appeal in this Amazon-fueled age of immediate gratification. Instead of paying about $21 for a box of a dozen chocolate chip cookies to be delivered to your friend, coworker or loved one, you can now pay roughly $2,500 for what the company deems its "bullion bundle" — a box of cookies plus a one-ounce, 24-karat bar of gold. The price of the package fluctuates with the daily gyrations of gold.

In South Korea: Aside from ramen and sausages, South Korea’s convenience stores have a new popular item on the menu — gold bars. The country’s largest convenience store chain, CU, has been collaborating with the Korea Minting and Security Printing Corporation (KOMSCO) to offer customers mini gold bars — and they’re selling like hot cakes.

A variety of finger-nail sized gold bars weighing between 0.1 gram and 1.87 gram have been up for sale at CU outlets since April. A 1.87-gram bar sells for 225,000 won ($165.76) and a 0.5-gram bar sells for 77,000 won.

Priced at 113,000 won each, 1 gram bars were sold out within two days, according to local news reports. The bars come with congratulatory messages, birthday wishes and even designs for personality types.

People in their 30s were most active in purchasing these gold bars, accounting for over 41% of the total sales since their launch, according to CU’s commerce phone app Pocket CU. Those in their 40s make up 35.2% of the sales, followed by people in their 50s at 15.6%. People in their 20s accounted for 6.8% of all sales."

- Franklin Sanders

The only problem with the "consumer gold" is when you try to sell it for anywhere near the price at which you bought it - try a 50% haircut at least. The big question for "consumer gold" (as opposed to "collectible" coins or good delivery bars) is provenance. For all anyone knows, it's gold-plated tungsten (which is virtually identical in density to gold). Plus, there is the BSA/AML aspect, "Why do you have so much gold, are you a terrorist or money launderer?" You have to clear 30% just to net out on the collectibles tax, to which gold is subject.

No, gold for most people is an insurance policy against the resolution of the Triffin Dilemma; namely, the dissolution of Bretton Woods / Petrodollar.

Everyone's holding..

https://www.zerohedge.com/personal-finance/vast-majority-professional-investors-own-some-gold

It's not quite the Rubicon, but gold crossed $2500 at closing on Friday:



From about $250 in 2000 to $2500 today. Not bad for a lump of metal. But muh Bitcoin . . . suck on a tulip bulb.

stereotomy says

It's not quite the Rubicon, but gold crossed $2500 at closing on Friday:



From about $250 in 2000 to $2500 today. Not bad for a lump of metal. But muh Bitcoin . . . suck on a tulip bulb.

Gold went up about 10% annually over last 24 years.

I would not put no more than $30,000 or 3% of assets (whichever is greater) in Bitcoin as a hedge in a fiat currency environment.

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From what I'm reading of various Wall Street pundits recommendations to high wealth clients (+$3 million in stocks/ETFs/liquid assets), put 3% of assets in a Bitcoin ETF, 6% in gold and silver, and 6% in an oil and gas ETF.

Well, I have to agree with Stephanie Pomboy - I'll take the short-term hit on gold as long as we don't have globomomo WWIII:

Looks like a buying opportunity is approaching. Maybe. It's still way up.

At the end of the month, a rally to put the lazy metal above $2800:



Every dog gets its day.

Each cellphone contains ~0.034 grams of gold.

Back when I started this homage to Mega in July 2022, gold was around $1800.



All I can say is "You've come a long way baby."

If rates go down, gold should go up even more.

How much upside do you guys predict

KgK one says

How much upside do you guys predict

Do you think there is real gold in Ft Knox ????

KgK one says

If rates go down, gold should go up even more.

How much upside do you guys predict

Way back in the day on iTulip, EJ predicted the price of gold would ultimately have to rise to the point where it fully backed all USD currency in circulation. At that time (2014-ish) it was north of $10K. Since iTulip is no more, I hope @Patrick doesn't mind me giving this recap.

Such a radical revaluation of gold could only be accomplished by a government on the verge of compete debt default and potential hyperinflation. One scenario was that all the foreign dollars would flood back into the US - Europe and Asia selling off UST, the breaking of the petrodollar, and the collapse of US MIC arms sales to recycle dollars. This would trigger hyperinflation as the US could only print money to fund itself - nobody else would want dollars. When demand collapses and supply is too high - yeah, guess the outcome.

Given the massive increase in M2 and M3, it would probably take a price of $50K to restore solvency to the successor to the USD under the above scenario. I.e., not quite Zimbabwe levels, but a revaluation of 50K or 100K old USD to 1 new USD backed by gold. Real or otherwise tangible assets would ultimately retain some value, but in the short- to intermediate-term chaos there would be fire sales.

One of the reasons EJ gave for wrapping up iTulip was that the US economy was essentially fraudulent, and conventional valuation and macroeconomic interpretations did not apply to a completely contrived economy. IOW, we are living in a Soviet-styled fake economy, where everyone pretends it works until it doesn't. Who's left holding the bag then?

@Patrick - I don't know if you had links to iTulip back in the day (2000's) or whether I found it from a link on HousingPanic (Kief was awesome). But I'm generous enough to thank you both for collectively saving my financial ass at least twice since the 'naughties.

Yes, I remember iTulip. There are still references to it on the site:

https://patrick.net/comments?start=-40&cs=iTulip

Though I probably also linked to it a lot in my housing links, which I'm not sure I have a record of anymore.

Shit - Gold rimming $3200 now. It's gotta be the chicoms buying like mf's. Everything else is tanking.

Edit: $3206

Gold to silver ratio is over 105 right now -- which is insane. Bought some paper silver last week (SLV). The rubber band that hold these metals to one another is stretched tight. Something's gotta give...

MolotovCocktail says

Each cellphone contains ~0.034 grams of gold.

That is about $4 worth of gold in each cell phone

So how much labor is required to remove the gold ?

What is the net profit of this type of business ?

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The three major gold bull runs in modern history: 1980, 2011, and 2024–2025.
1. The 1980 Gold Spike
Peak: $850/oz in January 1980
(Adjusted for inflation in 2024 dollars: ~$3,200/oz)
Drivers:
• Runaway inflation (CPI > 13%)
• Oil shocks and stagflation
• Iranian Revolution and U.S. hostage crisis
• Weak U.S. dollar and declining trust in fiat currency
• Low interest in holding dollars due to negative real returns
Crash:
Once Fed Chair Paul Volcker hiked interest rates above 20% to tame inflation, gold collapsed. By 1982, gold fell by over 60%.
⸻
2. The 2011 Gold Peak
Peak: $1,920/oz in September 2011
(Inflation-adjusted to 2024: ~$2,600/oz)
Drivers:
• 2008 financial crisis aftershock
• Fear of bank failures and sovereign debt crises (e.g., Greece)
• Quantitative easing (QE) and rising U.S. debt
• Zero interest rates, making gold more attractive
• Concerns about U.S. credit downgrade (S&P downgraded U.S. debt in 2011)
Crash:
As global markets stabilized and interest rate hikes returned post-2013, gold lost nearly 40% over the next few years.
⸻
3. The 2024–2025 Gold Surge (Ongoing)
Peak (so far): Over $3,400/oz in 2025
(Uncharted territory—not just inflation-adjusted peak, but nominal all-time high)
Current Drivers:
• Record U.S. debt (~$35T+) and rising deficit
• Inflation fears remain even as CPI moderates
• Geopolitical instability: wars, China-U.S. tensions, uncertain global leadership
• Growing loss of faith in fiat currencies
• Central bank gold buying at record levels (especially China, Russia, BRICS)
• Interest in de-dollarization and hedging against U.S. fiscal risk
• Domestic political instability in the U.S. (fears of authoritarianism, currency controls, etc.)
Is it a bubble or just a shift?
Too soon to say—but unlike 1980 or 2011, this surge is not occurring in isolation. It’s part of a broader re-evaluation of global financial systems, fiat vulnerability, and U.S. dollar dominance.
⸻
Comparison Chart Summary
Year Peak Price (Nominal) Inflation-Adjusted Key Driver Outcome
1980 $850/oz ~$3,200/oz Inflation, oil crisis, geopolitical fear Crashed post-Volcker
2011 $1,920/oz ~$2,600/oz Financial crisis, QE, debt ceiling drama Fell post-recovery
2025 $3,400+/oz All-time high Sovereign debt, inflation hedging, de-dollarization Still climbing

This may be either the end game of the Triffin Dilemma or a prelude to a new variation of fiat dollars akin to the invention of the Petrodollar in the 1970-80's.

The dollar is becoming almost an article of faith, just like Nuclear Fusion. So near, and yet so far . . .