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Gold: 'Inflation Will Beat Deflation And Gold Will Hit $3,000'

Gold looks set to move substantially higher as governments all around the world embark on a programme of "quantitative easing"

By Ian Williams
Last Updated: 2:18PM GMT 10 Mar 2009

Last July I wrote an article for telegraph.co.uk suggesting that gold had lagged other commodities in general and oil in particular and that gold would hit $2,000 an ounce over the next two or three years.

At the time oil was trading at $140 a barrel and using the gold/oil ratio I suggested that either oil was far too high or gold at around $900 was too low.

Since then all other commodities have collapsed in value, with oil showing the most spectacular collapse of all, falling to $35 a barrel, while gold is now higher with the price having moved up to about £1,000 an ounce.

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while gold is now higher with the price having moved up to about £1,000 an ounce.

The British pound is about $1.38, which would be about $1380 an ounce. Gold dropped below $900 today. Ian is only off by about 50%.

To see how incoherent this nonsense is, ask what the rate of default on home mortgages would be if the whole price level doubled. Then ask how the banks could possibly lose money. Then ask why the money supply would need to increase that much, the previous being true.

Sure they can overshoot. But this whole "oh god, it is so bad there must be inflation" story is incoherent nonsense. If they got prices to rise even a third, the whole thing would be over like that.