There are a number of reasons price inflation hasn't kept up with the gold price.
1. The gold market is tiny, and when the central banks are printing, investors crowd into the market, pushing gold much higher than a non-printing environment.
2. Prices on a number of goods are actual lower in real terms.
Everything electronic has benefited from Moores Law, and is actually cheaper.
Sourcing clothing, furniture, small appliances and toys from China has reduced prices.
The internet has made price comparison almost automatic, and eroded retail margins. Also
made hotels, airline fares, cell phones plans, auto insurance, and mortgage rates easy to compare.
Highly computerized retailers with high volumes, like Wal-Mart, Target, Best Buy, Costco, and Amazon
can push manufacturers to lower prices, distribute at very low cost, and still make good profits.
If the central banks stopped printing, gold could go to about $900 to $1000.
I expect the central banks will keep printing until gold is $2500 to $3000. |
