Question
II.23. The price of gold. Some people recommend that investors buy gold “to protect against inflation.’’ Here are the prices of an ounce of gold at the end of the year for the years between 1985 and 2013. Using Table 16.1, make a graph that shows how the price of gold changed in real terms over this period. Would an investment in gold have protected against inflation by holding its value in real terms?
| Year: | 1985 | 1987 | 1989 | 1991 | 1993 |
| Gold price: | $327 | $484 | $399 | $353 | $392 |
| Year: | 1995 | 1997 | 1999 | 2001 | 2003 |
| Gold price: | $387 | $290 | $290 | $277 | $416 |
| Year: | 2005 | 2007 | 2009 | 2011 | 2013 |
| Gold price: | $513 | $834 | $1088 | $1531 | $1204 |
(Hint: See page 372.)
II.23 While the value of gold dropped from 1987 to 2001 (in terms of 2013 dollars), an investment in gold most certainly holds its value today.
