Gold bugs often fear inflation and believe that gold will generally increase in price when inflation is high. But the correlation is not as simple as when inflation increases the price of gold increases. If it were, the inflation adjusted price of gold would be virtually flat. And as we can see from the chart below the red line is far from flat. From 1913 through 1970 the "nominal price" of gold was fixed by the government and so it remained relatively stable but that didn't mean that the purchasing power of an ounce of gold remained stable.   From 1880-1914 the U.S. dollar official gold price was $20.67 per ounce. But inflation was rampant in the economy (i.e. over 90% inflation just … [Read more...]