The Golden Age Begins

Silver and gold are sexy again. The price of gold reached an 18-month high today, while silver reached a 13-month high. At $1,006.40 an ounce, gold is nearing the high of $1,033 an ounce it reached in March 2008, during the very timely and well deserved death of Bear Stearns. Silver punches in at $16.75, still short of the $17.01 the precious metal of 25th anniversaries reached in August 2008.

By comparison, the U.S. Dollar Index is a truly terrifying sight. The greenback has been dropping like Trevor Berbick since March, and the fall is picking up speed again this month. Yet the deflationary paradox continues: Both the consumer price index and the producer price index are still falling. (New numbers for both indices will be out next week.) Meanwhile the stock market, powered only by sheer Mr. Magoo-class obliviousness, remains strong, with the Dow Jones Industrial Average still well above 9,600. Yield on the 10-year Treasury note (supposedly an inflation indicator) remains low as well.

In tangentially related news, the price of food also shows no sign of strengthening in the U.S., as yields for an assortment of crops look to be larger than usual, with no clear evidence of increasing demand. (Performance may vary if you're carb-free.)

I have thrown out any number of crackpot theories to explain why the dollar continues to buy more while being worth less. (Or just worthless.) Many of you have upbraided me for my ignorance, madness and funny smell, but I don't think I've managed a stretcher on the order of Bloomberg's explanation for the price of gold: that it's rising on the shocking and totally unprecedented news that Israel and Hizbollah are fighting.

Goldbugs, I cannot follow you, but I wish you well. Hold onto your krugerrands. The price of gold has never gone to zero. It has never gone to zero!