If you inflation-adjust the previous gold price record of $850/oz set in January 1980 you get a value of around $2,200/oz, does that mean that gold is no longer an inflation hedge?

Inflation-adjusting the $850/oz peak set in January 1980 would indeed give a figure of c. $2,200/oz. However, the gold price only fixed there for one day. Three weeks earlier it was trading at $473/oz, a price it had risen to gradually over the previous three years, and a week later it was trading at $673/oz. Inflation-adjusting from $850/oz is an extremely biased starting point. It would be more objective to “smooth” this temporary spike. A trend line drawn through the daily gold price between 1979-1981, for instance, gives a much more impartial starting point of c. $470/oz for January 1980. In today’s money that would put gold at c.$1,200, close to the recent record of $1,011/oz set on March 17 2008.

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