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To: steve0
What happens to gold in a dollar deflationary environment?

It seemed to do well in the 1930's.

38 posted on 08/12/2010 10:22:04 AM PDT by NeoCaveman (Defeat Dingy Harry Reid)
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To: NeoCaveman
What happens to gold in a dollar deflationary environment? It seemed to do well in the 1930's.

The dollar and gold were by definition the same thing in the 1930s. That's what the gold standard was.

Since the dollar's value was defined by law to be worth a fixed amount of gold in the 1930s, the price of gold never went up or down without an act of Congress changing the value of the dollar.

Before the 1930s one oz of gold was always equal to 20 dollars. In the Great Depression, Congress devalued the dollar to 35 dollars per oz because the US government went bankrupt. Between the 1930s until 1971, when the US went off the gold standard, the price of gold was always 35 dollars per oz. That's why we never had serious inflationary problems and house prices were $30,000 instead of $500,000. The dollar bought a lot more per dollar back then.

43 posted on 08/12/2010 10:50:46 AM PDT by old republic
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