The True Gold Price Peak Is Still Far Away

The price of gold per ounce still needs to rise by nearly $700 to reach its all-time high in real terms.

Inflation erodes the value of our assets. To calculate the genuine ("real") return on an investment, we must therefore adjust nominal figures for the inflation that has accumulated over time.

In that sense, gold's current price of $2,060 per ounce has not yet set a genuine record. Breaking the inflation-adjusted 2011 peak would require a price of $2,149.69, while matching the 1980 all-time high in real terms would require gold to reach $2,722.18 per ounce.

Even achieving the lower of these two levels would generate significant media coverage, drawing fresh capital into the gold market; a move above $2,700, however, could ignite a true buying frenzy.

For now, there is no sign of manic pressure in the gold market. What we are seeing is a strong, moderately but steadily advancing bull market getting underway -- one that points towards a prolonged upward trend.

Volatility is nonetheless expected to increase sharply in the weeks ahead, so it may be worth investing in gold in several tranches for those who do not want to miss the gold bull's charge.

Source: kitco.com