There have been a number of good diaries from the "experts" regarding possible government ginning of statistics to pretty up numbers. On many blogs it's an article of faith that inflation numbers put out by the US government drastically understate the real life inflation the average American is facing.
Historically one key indicator of inflation has been the price of Gold. Gold Bugs were in their heyday in the late 70s/early 80s as inflation raged and the price of Gold reached astronomical heights. I do not consider myself a "Gold Bug" i.e. a person who advocates investing large chunks of money in gold and I'm highly skeptical of any whiff of "government conspiracies".
None the less as a person who has invested in the Gabelli Gold AAA fund (as a small percentage of my overall investments!!!) and a person who has a life long love affair with gold as a decorative metal, I follow the price of gold and gold mining stocks daily. So when "mainstream" websites such as Marketwatch.com start to give credence to what was "wacky" conspiracy theories about the government suppressing the price of gold to hide the onset of inflation, I sit up and take notice.
No Rest For The Gold Stalwarts
By Peter Brimelow, MarketWatch
Last Update: 6:38 AM ET Aug. 22, 2005
NEW YORK (MarketWatch) -- Gold bulls were snorting with rage and grinding their teeth at the end of last week.
Record prices for oil and copper, unexpectedly high inflation numbers, nothing but alarming news out of the Middle East -- and Comex gold closed down $8.70 an ounce on the week, slipping away from the promising post-June high of the previous Friday. This pullback came despite the gold contract making a new 2005 high on Tuesday, to boot. (Click here for more.)
Only inattentive observers offered summer doldrums as an excuse. Volume was actually quite heavy for the time of year, averaging over 50,000 contracts daily. Open interest, representing the total number of contracts outstanding, rose by nearly 4%, which is quite a lot. Fresh buying was evidently overwhelmed by fresh selling. Why?
The Privateer, Australia's omniscient gold Web site, was unusually blunt:
"When the 'higher-than-expected' 0.5% CPI number was announced on Aug. 16, gold climbed $4.70 to a new high in this cycle of $446.10. But the next day, when the much worse 1.0% PPI number was announced, Gold fell $6.20 to $439.90.
"Something had to be done about the ultimate 'inflationary indicator,' which is the gold price. On Aug. 17, faced with the worst official measure of inflation for years, it was. ... You should find it in any way surprising. After all, governments have been getting away with their unemployment and 'price inflation' measurements for even longer."
Somewhere along the line the mainstream financial press stopped laughing at those who advocate investing some of your portfolio in the gold sector. Now maybe it seems they have stopped laughing at those who point to governments when puzzling over the curious performance of gold over the past two-three years. I used to think tin-foil hat conspiracists were one taco short of a combo plate. But since November 2000, I'm no longer sure!