Gold Surpasses Its 1980 Inflation-Adjusted Peak: What’s Next?
Gold has officially broken past its inflation-adjusted peak from January 1980. Back then, gold hit $850 per ounce, which, when adjusted for inflation, equates to approximately $2,780 in today’s dollars. With gold now surpassing $3,000 per ounce, this raises an important question: Are we witnessing the beginning of a sustained era of strength for gold, or is this just another temporary surge before a potential correction?
One key factor influencing gold’s movement is inflation. While inflation in February dropped more than expected to 2.8%, the impact of decades of government money printing and excessive spending continues to push prices higher across the board. Historically, gold has a tendency to lag behind inflation but eventually catches up—something we’re seeing play out now.
At present, gold’s inflation-adjusted price sits around $3,200, meaning its recent rise is not necessarily an overextension but rather a long-overdue adjustment to broader economic realities. Given this context, the crucial question remains: Will gold continue its ascent beyond inflation-adjusted levels, or is a correction on the horizon?
This is not the worst time to buy gold
—people have been saying that for decades. In 2005, gold was $444, and when it first broke $2,000, many thought it was overpriced. Yet, here we are. If you’re investing long-term, you’ll be fine.
Gold isn’t a short-term investment for quick returns—it’s a hedge against inflation and a store of value. Unlike cash, which loses purchasing power over time, gold has historically maintained or increased in value. Governments and institutions are stockpiling gold as global tensions rise, signaling its importance as a financial safeguard.
Watch, Read, Listen
This layered structure helps buyers understand the overall cost and factors involved in gold pricing
To understand the pricing of gold, it’s important to differentiate between a few key concepts, particularly the spot price, futures price, and premium.
- Spot Price: The spot price of gold is the current price at which gold can be purchased for immediate delivery. This price represents the most up-to-date cash value of gold for physical delivery, often set by well-known sites like Kitco, APMEX, or other major bullion dealers. The spot price fluctuates based on global supply and demand, and it’s typically used as the baseline or “standard” for quoting gold prices.
- Futures Price: Futures prices differ slightly from the spot price as they are associated with contracts for future delivery. These contracts are actively traded on exchanges like COMEX, where the futures price of gold is determined by the contract with the highest open interest (meaning the highest volume of outstanding orders). Futures prices can influence spot prices and are crucial for understanding market sentiment about where prices might head, but they are not the price one pays for immediate, physical gold.
- Premium: When purchasing physical gold, such as coins or bars, most buyers pay a premium over the spot price. This premium is the additional cost, usually a percentage above spot, that reflects manufacturing, distribution, and profit margins. For example, if the spot price of gold is $1,800 per ounce, and a dealer adds a 5% premium, a buyer would pay $1,890 per ounce. Premiums can vary significantly depending on the type of gold product and the dealer.
Example of Buying Gold: If you’re purchasing gold coins from APMEX, the price you see on the day of purchase will include both the spot price and any additional premium. APMEX and similar sellers help illustrate the cost you would actually pay, beyond just the raw market value.
In summary:
- Spot Price: The baseline price for immediate physical gold.
- Futures Price: The market-driven price for future delivery, based on the highest open-interest contract.
- Premium: The added cost above spot, specific to each gold product and seller.