How valuable is gold really? The answer we receive depends on who we ask and what their thoughts are.
Everyone has an idea of what something is worth, the house of the object in question, the pocket watch of the late grandfather, or a special part. In this respect, gold is no different.
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The price of a particular item or asset at a given time is a reflection of all the different opinions. Some are based on basics, some on technical factors. But the combination of all the ideas and the resulting expectations (some expect the price to rise, some to fall or stay at the same level) plus all the other known factors that can affect the price, give us the clearest possible indication of the available value for the item: market price .
If we believe that gold is money, we will probably have a different opinion or expectation from someone who considers gold an investment; or someone else who thinks that gold has no useful value.
If we do not believe that gold is money, then there is something else. Another thing is, in practice, paper, currency (dollar, euro, yen, etc.) issued by a government or central bank.
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With this in mind, let’s re-explain our original question. In other words, “How valuable is money?” Under the simplest conditions, money is worth everything that can be exchanged. The value of money lies in its purchasing power.
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The logic with this is understandable is quite simple. Gold (or any other currency) is worth what we can get with it.
What can we get from this? And how do we know that the value of our gold / money is real?
Gold, which is currently $ 1,240.00 an ounce, is something we can buy today for twelve hundred and forty dollars.
But is $ 1,240.00 an ounce real today? Or rather, are there any reasons to expect the price to rise or fall to the extent that it affects our choice to hold gold against the US dollar?
We need to do some research to answer this question.
To spread any controversy over whether gold is money (and, if possible, to put aside any bias), let’s go back to a time when gold was equal in both money and value in US dollars.
In 1913, both gold and the US dollar were legal tender and replaced each other. Or it was converted to another at a fixed price. One ounce (.97 ounces) of gold coin was equal to twenty US dollars, and vice versa. (Note: The official gold price was $ 20.67 per ounce, equivalent to 97 ounces of gold on a gold coin is $ 20.00).
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It may seem that in the last one hundred and four years the ‘value’ of an ounce of gold has increased by fifty-nine per cent ($ 20.67 in 1913 and $ 1,240.00 today). In addition, this means that today we can get sixty times more per ounce of gold than we could in 1913.
We have said before that the value of money is something we can get with it, or we can get in return, but what has become clear so far is whether there is an increase in the actual ‘value’ of gold, despite a fifty-nine percent increase in the ‘price’ of gold. we do not know if there is a reduction if it fails to maintain its original purchasing power.
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However, we can still get some results relative performance. Features are the fact that gold has a value of fifty-nine percent against the US dollar. As a result, the US dollar fell by more than nine to eight percent against gold.
Now we need to know how both gold and the US dollar are in absolute terms in terms of purchasing power.
And the results are clear. It maintained the value of gold and even necessarily increased its purchasing power over a period of centuries. In addition, the results confirm the current market price of gold at $ 1,240.00 per ounce.
What we don’t know is how accurately the current price of $ 1,240.00 per ounce reflects the effects of the policies that have led to our current situation. To be more precise, how much has the US dollar depreciated since 1913? Ninety-eight percent, less; ninety-nine or more?
The current market price for an ounce of gold is $ 1,240.00, indicating a loss of a fairly specific nine to eight and a quarter of a percent. Ninety-eight percent decline in the value of the US dollar turns into a price of about $ 1,000.00 per ounce of gold. And if the decline is ninety-nine percent, then the price of gold should be close to $ 2,000.00 per ounce.
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In August 2011, an ounce of gold was sold at about $ 1,900.00. This means that the value of the US dollar has fallen to ninety-nine percent since 1913.
But about four and a half years later, in January 2016, gold was bought at $ 1,040.00 an ounce. This price indicates a decrease of ninety-eight percent in the value of the US dollar. In fact, it is almost equal to this sign. Ninety-eight percent decrease in the value of the US dollar is equivalent to a fifty-fold increase in the price of gold since 1913 (100 percent minus 98 percent = 2 percent; 100 percent divided by 2 = 50; $ 20.67 per ounce 50 = 1033 , $ 50)).
Between 1999 and 2011, gold rose from $ 275.00 an ounce to $ 1,900.00 an ounce. And during that period, the US dollar depreciated.
Between August 2011 and January 2016, the US dollar clearly had a certain upward trend. And this upward trend was reflected in a similar decline in gold.
Since January 2016, both the gold and the US dollar have reversed in about six to nine months, and then generally stabilized at levels close to their current levels.
Gold in US dollars is between $ 1,000.00 and $ 2,000.00 per ounce. In addition, and more specifically, the current price per ounce is a reasonable reflection of the current value of gold, which is $ 1240.00.
Any successive difference of $ 1100.00 per ounce and $ 1300.00 per ounce will be accompanied by similar, inverse changes in the value of the US dollar.
The US dollar is the only barometer you need to watch. Elements of surprise and time are critical. Especially if you are short in mind.
Among the factors that could have a significant impact on the US dollar are 1) new and unexpected moves by the Federal Reserve 2) a clearer picture of the size of the Fed’s balance sheet 3) accelerated and delayed effects of inflation previously created by the Fed. 4) credit imposition 5) Fed’s reaction to credit imposition.
Some of these items, or changes to them, can also have a positive effect on the value of the US dollar. Therefore, you should watch the dollar, not a specific event.