How Much Was 1 Yen Worth In The Old Days How Much Is Gold Really Worth?

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How Much Is Gold Really Worth?

How much is gold really worth? The answer depends on who you ask and what they think.

Everyone has an opinion on what it’s worth, whether it’s your home, a late grandfather’s pocket watch, or a specific stock. In this regard, gold is no different.

The price of a particular item or asset at a given time reflects all the differing opinions. Some are based on fundamentals, others on technical factors. But the combination of all the opinions and the resulting expectations (some expect the price to rise, others expect it to fall or stay the same) and all the other known factors that can affect the price gives us the clearest possible indication. the current value of the item in question: the market price.

If we believe that gold is money, we are likely to have a different opinion or expectation than someone who sees gold as an investment; or someone else who believes that gold has no useful value.

If we don’t believe gold is money, we say it is something else. In practice, this is fiat, a paper currency (dollar, euro, yen, etc.) issued by a government or central bank.

With this in mind, let’s rephrase our original question. In other words, “How much is money worth?” In the simplest terms, money is worth as much as it can be exchanged for. The value of money lies in its purchasing power.

Once this principle is understood, the logic is quite simple. Gold (or any other money) is worth what you can buy with it.

So what can we buy with it? And how do we know that the value of our gold/money is realistically priced?

Since the price of gold is currently $1,240.00 per ounce, the value of gold today is twelve hundred and forty dollars.

But is $1,240.00 an ounce realistic today? Or rather, are there reasons we can expect the price to rise or fall significantly, which will influence our decision to hold money in gold against the US dollar?

To answer this question, we need to do some research.

And in order to dispel arguments about whether or not gold is money (and to set aside biases as much as possible), let’s go back to a time when both the US dollar and gold were money, and equal in value.

In 1913, both gold and the US dollar were legal tender and interchangeable. Either could be exchanged for the other at a fixed price. One ounce (0.97 oz) of gold coin was equivalent to twenty US dollars, and vice versa. (Note: the official price of gold was $20.67 per ounce, which is $20.00 multiplied by 97 ounces of gold).

On the surface, it appears that the “value” of an ounce of gold has increased fifty-nine hundred percent over the past one hundred and four years ($20.67 in 1913 to $1,240 today). Expanded, this would mean that one ounce of gold can buy sixty times as much today as it did in 1913. Not so.

Earlier we said that the value of money is what we can buy with it or get in exchange for it, but it should be obvious by now that although the “price” of gold has increased by fifty-nine hundred percent, we don’t know if it has increased in actual “value” , or perhaps we experienced a decrease if gold could not maintain its original purchasing power.

However, some conclusions can still be drawn relative performance. The specifics are that the value of gold has increased by fifty-nine hundred percent against the US dollar. As a result, the US dollar has fallen by more than ninety-eight percent against gold.

Now we need to know how both gold and the US dollar have performed in absolute terms in terms of purchasing power.

And the results are clear. Gold maintained its value and even increased its purchasing power in absolute terms during the century period examined. The results also confirm gold’s current market price of $1,240.00 per ounce.

What we don’t know is the extent to which the current price of $1,240.00 per ounce accurately reflects the effects of the policies that led to where we are today. More specifically, exactly how much has the US dollar lost in value since 1913? Ninety-eight percent or less; ninety nine or more?

Gold’s current market price of $1,240.00 per ounce indicates a fairly specific loss of ninety-eight and 1/4 percent. A ninety-eight percent drop in the value of the US dollar means the price of gold is approximately $1,000.00 per ounce. And if the decline is closer to ninety-nine percent, then the price of gold should be closer to $2,000.00 per ounce.

In August 2011, gold was trading at approximately $1,900.00 per ounce. This would represent a nearly ninety-nine percent decline in the value of the US dollar since 1913.

But almost four and a half years later, in January 2016, gold was trading at $1,040.00 per ounce. This price represents a nearly ninety-eight percent drop in the value of the US dollar. In fact, it is almost exactly the same as this trademark. A ninety-eight percent decline in the value of the U.S. dollar represents a fifty-fold increase in the price of gold since 1913 (100 percent minus 98 percent = 2 percent; 100 percent divided by 2 percent = 50; $20.67 per ounce multiplied by 50 = $1,033.50 per ounce).

Between 1999 and 2011, the price of gold rose from $275.00 to $1,900 per ounce. And over the same period, the value of the US dollar has fallen commensurately.

Between August 2011 and January 2016, the US dollar was clearly on an upward trend. This upward trend was reflected by a similar percentage decrease in gold.

Since January 2016, both gold and the US dollar have reversed for about six to nine months before generally stabilizing at near current levels.

CONCLUSIONS:

Gold is between $1,000.00 and $2,000.00 per ounce in US dollars. Also, and more accurately, the current price of $1,240.00 per ounce is a fairly accurate reflection of gold’s current value.

Any consequential deviation above $1,100.00 per ounce on the downside and $1,300.00 on the upside will result in similar inverse changes in the value of the US dollar.

The US dollar is the only barometer you should be watching. The elements of surprise and timing are critical. Especially if your thinking is short-term oriented.

Items to consider that could have a significant impact on the US Dollar are: 1) new and unexpected actions by the Federal Reserve 2) a clearer picture of the size of the Fed’s balance sheet 3) accelerated, delayed effects of the Fed’s previously created inflation. 4) credit collapse 5) the Fed’s reaction to the credit collapse.

Some of the listed items, as well as their variations, can positively affect the value of the US dollar. That’s why you should pay attention to the dollar, not the specific event.

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