Macro Tsimmis

intelligently hedged investment

Is Gold Overpriced?: A Macro View

Posted by intelledgement on Fri, 30 Mar 12

…[T]he price of gold is up sharply of late: roughly 5% so far this year, 10% in 2011, 30% in 2010, and 24% in 2009. Gold has clearly been appreciating in value faster than the dollar has been declining for the past few years. So, even taking into account the risks of a default in Europe, a war with Iran, a recession in the U.S., a growth slowdown or worse in China and India and so on…is gold overvalued here?

Published earlier today by The Motley Fool, this article graphs the price of gold versus the decline in the value of the dollar to determine how much of the former is explained by the latter. (Spoiler: probably less than you think.)

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