the gold price serves as an independent yardstick for the level of real inflation. it defeats the purpose to 'adjust for inflation'.
'adjusting for inflation, prices have been remarkably stable for the past century'
'adjusting for inflation, prices have been remarkably stable for the past century'
I'm not normally doing much business in gold, the value of gold compared to the dollar is nearly meaningless to me. I do often buy things like food and energy. To me the value of the dollar compared to a gallon of gas or a plate of food or a kWh of electricity is the "real" inflation.
The value of gold isn't "real" to me or most consumers.
the relative value of specific goods fluctuates within a small constant
in the long run, the exponential dominates the linear
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thus the price of gold is a yardstick of the exponential inflation of prices, irrespective of the relative fluctuations of gold vs food vs energy
Or, here's an idea, maybe we should use a weighted index of several of those things as a measure, in order to prevent misleading data from the fluctuations in the price of any one item?
Nah. Who would do that. We can just look at the price of gold, that's all that really matters.
See e.g https://www.macrotrends.net/1380/gold-to-oil-ratio-historica.... Over 80 years (since 1946), the ratio held stable within 10-40 range, with a few brief spikes. The variance from the average held in a band [-2x, 2x], with a few brief spikes of ~ +-4x.
See also e.g. https://www.creditdonkey.com/gas-price-history.html for the raw price of gasoline, exponentially shaped. The increase over 80 years (since 1946, to match the ratio dataset) is 15x.
Extra wrinkle. The exponent of the exponential is not quite constant over time, currency can debase much faster than one would naively expect by extrapolating historical trends.
Edit. For completness, the BLS inflation index tracks a price inflation from 1946 to 2023 of, guess what, 15x. https://www.in2013dollars.com/us/inflation/1946
That's done already. More useful: such index as a ratio of wages. Say, [price of standardized basket of commodities] / minimum wage.
That would tell you how many # of paid work needed to (for example) fill a shopping cart with a week's worth of food + heating / powering one's home over that time.
("minimum wage" = applies to folks scraping by in low-paid jobs. Higher earners are living the good life anyway, imho).
And here's the real question. If the price of gas and the price of food stays the same but gold goes to $9,000/oz, did my life change? No, not really. If the other prices stay the same but gold goes to $20/oz, did my life change? No. If gas goes to $50/gal, did my life change? Radically. If (index of food) goes 10x higher, did my life change? Radically. Which is the "real" inflation again?
You should "adjust for inflation" (using other measures for inflation) to examine the current price of gold. If gold is still expensive, either the inflation adjustments are incorrect, gold is mispriced, or external force is driving demand for gold.
Put another way, because gold is an "independent yardstick" for inflation, you have to "adjust for inflation" to draw any conclusions about the current price of gold.
normally, when we talk about inflation. real value is the yardstick. ie. something more akin to the big Mac index.