the audit

This Gold "Record" Keeps Skipping

The Journal and others fail to account for thirty years of inflation
September 29, 2010

The Wall Street Journal goes page one with a misleading story about gold, splashing this headline across four columns atop the page:

Gold Vaults to New High

Gold hit $1,306 an ounce yesterday, which is a nominal record. Emphasis on nominal. That doesn’t mean anything, really. The real record was set thirty years ago at $2,318 in 2010 dollars. The Journal, incredibly, doesn’t mention this once in its story. This isn’t just an institutional knowledge failure, it’s one of numeracy.

When reporting on price changes over long periods of time, you have to account for inflation. It doesn’t make sense not to do that. Otherwise you’re about as valuable as your pops remembering the good old days when a loaf of bread cost 51 cents (which it did in 1980). The value of a dollar has fallen 62 percent since then.

Again, this is A1 of The Wall Street Journal. But the Journal is hardly alone here.

The Financial Times, which also has no excuse, says gold is at a record and doesn’t mention that it’s far below its all-time inflation-adjusted peak. That’s in an otherwise pointless story headlined “Gold forecast to hit $1,450 an ounce.”

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Would the FT be so credulous to write a story saying “Dow forecast to hit 12,000”? Same thing. At least its story is buried on page twenty-five.

Bloomberg blows it, as does Reuters, the Associated Press, ABC, and many, many others.

The real story was told much better by WSJ corporate cousin Marketwatch the other day:

Gold hit a long-anticipated high-water mark Friday, briefly breaking through $1,300 an ounce. But the precious metal still has a long way to go to reclaim its inflation-adjusted all-time highs.

A gold investor who bought an ounce of the metal at its January 1980 peak would need gold to advance by more than $1,000 an ounce from today’s record levels to come out ahead when 30 years of inflation are taken into account.

(Here’s where I disclose that I own gold shares in my IRA)

But guess who screws it up today, too?


This gold thing is the gift that keeps on giving for a media critic. So let me end by recycling what I said the last time I wrote about this:

This is part of a broader problem in the press. I’ve written about how the media rarely adjust stock prices for inflation, which has the effect of misleading investors into thinking returns are better than they really are.

Why does this happen? Well, for one thing, a lot of journalists are innumerate and a lot don’t know much about history. But for another, darker reason: it’s an easy story. A reporter and editor will inevitably draw better play for a piece if it’s about a “record” than if it’s about how gold is simply up a few bucks. That incentivizes journalists to sex things up at the expense of the truth. This is hardly a phenomenon limited to numbers-based stories.

The bottom line is simple: These stories are misleading. Don’t mislead your readers.

Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR’s business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum.