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I got another email from Backwoods Jack today below:

You guys say the purchasing power of gold doesn’t drop when gold plummets from $2,000 to $1,200. Can you explain this to me?  We have lost thousands dollars in purchasing power. Will you buy back our gold at the purchase price, which is $1669 per oz.?  In your mind, we haven’t lost any value.  Granted, gold has monetary value, but it is not constant. Its value varies at any particular time.  At least it has some value – compared to a piece of wood.  Backwoods

I replied:

First of all we never said that, gold at $1,200 has the same value as gold at $2,000.  I’m not sure where you came up with that?  If you want me to buy back your purchase at $1,669, how about also selling me back the gold we sold you at $350 and $400 and $500 – and the silver we sold you at $6 and $10 and $12?  Fair is fair.

In 2000 I purchased a new Porsche Boxter for $48,000.  It cost me the equivalent of 175 ounces of gold.  Today I can purchase a new Porsche Boxter for $60,000.  It will set me back 49 ounces of gold.  In 2009, gold was the same price it is now and it would have cost me a bit over 50 ounces then.  I say gold has held its purchasing power very well, in spite of the recent correction.  At the peak, it would only cost around 30 ounces, but it’s still just a small fraction of what its cost, in gold, would have been at the onset of the bull market.  Also, most of the gold you purchased cost you between $300 – $800/oz.

When you started buying gold, the Dow was around 11,000 – it is up less than 60%.  Gold is up 300% to 400% during the same period.  You only “lost money” on your last purchase, which was a minor buy compared to your earlier purchases.  You calculate your “loss” from the peak, of around $1,900.  Why not think in terms of your profits from your pre-2008 purchases?

Don’t worry, in 2014 I expect you will see a new high in gold and the stock market could easily drop a third or more.  If I am wrong, I give you permission to throw rotten eggs at me.