Total mine output of gold this year in the world (as well as average for about last 10 years) is about 2500 tons. At the current price (which some say is too high) that amount is worth about 100 billion Dollars.
Now here I again have to repeat myself: the Fed is proposing to "print" another 2 trillion Dollars in the near future after having "created" 1.7 trillion last year.
It's not just the magnitude of the difference, but also the nature of the two assets that must be taken into account. Paper Dollars can and will be further multiplied by the wonder of the reserve banking system. In normal economic times this multiplier is about a factor of ten. Now the Fed claims that it has to create these huge amounts because credit is not being created in its usual fashion. That may be true, but will the Fed be able or even willing to withdraw this potent drug from circulation when things return to normal ?
Remember that this is the Fed that was utterly unable to foresee what the housing bubble would do. The same Fed that saw no problems when trillions of Dollars were lent to borrowers who would not get a loan of even twenty bucks from a responsible lender.
When the Fed announced its first printing job in December of 2008, copper prices were at about $1.25 per pound. Today copper trades at almost record highs again: $3.70 a pound. Even though crude oil trades at "only" $82 per barrel (after having dropped to a low of $35 from a high in 2008 of $150 ), major commodity price indexes are making new record highs. The Dollar index (a basket of the currencies of the major trading partners of the USA) would be trading at a record low, it not for the temporary weakness of the Euro.
Here are two worthwhile links:
http://online.wsj.com/article/SB10001424052748704847104575532442706099582.html?mod=WSJ_hpp_LEFTWhatsNewsCollection
http://www.pbs.org/wgbh/commandingheights/shared/minitext/ess_germanhyperinflation.html
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