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1980 Gold peak from an Austrian perspective?

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MatthewM Posted: Thu, Dec 20 2007 4:50 AM

What are the main causes for the rise and subsequent fall of the price of Gold from the time when Nixon cancelled the Bretton Woods agreement to the time the Gold bubble popped in 1980 at over $850/oz? I can understand why it would go up once Nixon cancelled the Bretton Woods agreement and went to a purely fiat monetary base, but why did the gold price pull back from the highs in 1980 and then stagnate for 20 or more years before its most recent movements? 

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Harksaw replied on Thu, Dec 20 2007 9:03 AM

 This is completely hearsay, but I once heard someone say the price drop was because lots of governments were selling off their gold reserves.

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jsh replied on Thu, Dec 20 2007 10:28 PM

 according to my theory, the elite told the oil producing nations to buy gold, then drove the price of gold down thru "gold leasing" (letting companies borrow the gold, then sell it on the market) and selling central bank gold reserves, forcing the oil producing nations to liquidate their gold stocks at a huge discount.


gold leasing

confessions of an economic hit man

the energy non-crisis - warning, this guy is a terrible public speaker

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newson replied on Fri, Dec 21 2007 8:28 PM

gold price is a function of the public's inflation expectations (as distinct from inflation in its true, austrian sense ie growth of money supply). when paul volker became fed chief (1979?), cpi was approx. 13% (30year us t-bonds were on running yields of around 15%, from memory). he took short-term us rates to 19%. steep recession followed, liquidating the malinvestments of the seventies. the public's faith in paper was restored.  cpi was largely tame for the next two decades for various reasons - entry of communist blocks into the world economy, and also the hangover on vast over-investments in commodities during the seventies.  many will also cite gold-hedging as a cause of gold's long decline, i'm inclined to think that this is a red-herring.  gold's decline matched declines on almost all commodities from 1981 to 2000.

the gold chart from 1981 till today is mirrored by the chart of us long bond yields.

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