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Gold or gas: which is stronger?

Whenever I get ready for a road trip my mind turns to gasoline.

Whose doesn’t?

After all, even if I fly, I have to drive to the airport.

The benefit of the way my brain works is that I have certain gasoline prices etched in my memory. I travel frequently. Most prices just wash out of mind after a short time because they don’t signify anything to me at the time.

But some prices stick.

I can tell you the last time a gallon of gasoline was less than a dollar was in December 1998 when it sold for 98.9 cents a gallon here. I am happy to say I filled my tank before this price passed into history.

In September 2005 just after Katrina hit New Orleans, gasoline spiked to what seemed like an incredibly high price of $3.159.

In July 2008 I paid the most I ever paid here for a gallon of gas at $4.249 a gallon.

Lately I have been watching gasoline price signs in downtown Iola as I prepare to leave for the World Money Fair in Berlin, Germany.

After declining to $3.199 a gallon, the price of gasoline turned around before I filled my tank to $3.249.

Now if I paid for my gasoline with gold, how would I have fared today compared to 1998?

What I do not remember about the 1998 gasoline price was the specific date I filled my tank. All I can say is it was the first part of the month.

So, I’ll take the Dec. 7, 1998, gold closing price of $294.80 to determine that an ounce of gold would buy 298.08 gallons of gasoline.

At Friday’s gold close of $1,656.40, an ounce would buy 509.82 gallons of gasoline.

If I had put that gold ounce aside in December of 1998 when I last purchased gasoline for under a buck a gallon, I would come out today well ahead of the game.

Gasoline would have to be $5.56 a gallon for the price relationship to be identical with 1998.

If gold is merely a hedge against inflation, does that mean the price of bullion will likely fall to bring the purchasing power closer into line with what it bought in 1998, or will gasoline rise from current levels to reach the same end?

Buzz blogger Dave Harper is editor of the weekly newspaper “Numismatic News.”

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One Response to Gold or gas: which is stronger?

  1. Tom Snyder says:

    When gold was pegged at $35.00 an ounce, the price of gas was about 29 cents per gallon. You would
    get 120 gallons for an ounce of gold. There does not appear to be any real correlation. Oil prices have
    to do with market prices and refinery and distribution costs. Volume is so huge, the prices remain
    competitive.
    In the 1940′s the average middle class apartment monthly rental in the city was the same as an ounce of gold. $35.00. I don’t think it’s up to $1650 per month.
    Low interest rates may have some effect on market prices. When banks pay 4% again, things will change.

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