- Gold price III, the real price of Gold?

Gold price III, the real price of Gold?

Darth (et al). It struck me in our recent debate about the Gold price that we may have both lost sight of one factor. You quite rightly pointed out that the dollar has slipped so the current record highs need to be offset however what about the US policy of fixing the gold price in the 1930's? Also if we consider the low price in 1900 against the buying power of the dollar in 1900 (what was a dollar worth, equivalent in today's terms) is there a way to calculate the "real" value of gold? Using these calculations has gold increased dramatically since 1900 or is it stable? The current price of around $918 would have been considered a fortune in 1900.... Can Darth or anyone with a good calculator help...?

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At this point, the american dollar is horrible to have your money invested into right now. It is getting weaker and weaker, but gold is still gold. At this point, it is probably smart to start looking into commodities and get your money out of wall street!
Before the Great Depression of the 30's a US green-back was redeemable in gold, which meant it's value was locked into the price of gold. Now it is just "legal tender", which means it's worth has alot to do with how much of it is in circulation and is being produced. During the Bush II era, the US mint has been producing alot of money to fund the wars in the Middle-East. This has made the US dollar go into a free-fall that has made all the other currencies look as if they are going strong, since everything is compared to the green-back. Commodities are also priced in US currency and so the rise in things such as oil, gold and silver are a result of a falling US dollar. As the US mortgage crisis unfolds and countries such as Saudi Arabia and China trade in their devalued US money for other currencies, the situation in the US will only get worse, and the problem will be felt world-wide. So enjoy the ride and hold on tight. If you compare the price of gold between 1900 and 2007 using different currencies, you will see a different trend. The price of gold has mostly gone up over the past hundred years because of inflation. Medals are a good, stable thing to invest in. Bill Gates has 1/3 of his fortune invested in silver. If you go back to about 1993, the Canadian dollar was about 63 cents US. If you knew the price of gold in 93, then take the price of gold now and multiply that by 0.63 and compare that number to the price in 93. I would bet it is alot closer to being equal, compared to the actual difference in the price of gold in US dollars.
I have a very good calculator but unfortunately I am not so hot in operating it.......Wish I had some gold shares and platinum shares now. Anyway MJ this question is too difficult for me on a Friday afternoon.......
I cannot answer for the 1900's but in the late 70's the gold price hit an all time high topping $800/oz. It did not last for long and at around that time I went to New York and got $1.00 for R0.82.($16 meal costs R13) I was living in England and a Rand was exchanged around that time for R1.70 =£1.00 The price of a dollar in £ just 4 years ago was around $1.40 =£1 That means that taking the dollar drop in the last few years today's price in other currency would be worth around $640 So you can say that since 1978ish to 2008 the price has lost but after dropping back in the early 80's it has just doubled. The price of my house has done the same since 1999. I sold a house in Hampshire in 1981 for £17000 which would sell today for £250000 an increase of nearly 15 times. Remember that the $ or the £ or anything else for that matter, is not linked to the gold price. It is therefore vulnerable. If for instance the US gets out of it's massive debt. the gold price MAY drop again. Another thing to remember that most gold producing countries make a profit from the sale of gold at $300. SA's mines are very deep and gold production is more expensive.SA has therefore only been making decent profits in the last few years. Today is a good time to invest in gold or even better Platinum where some shares have gone up about 20% in the last week or so. One has to wonder why when the gold price has been so high for the last few years, the deficit in SA reported yesterday was so high.
Presented here are six indicators for making such comparisons in US dollars between any two years from 1790 to 2005. They are the CPI, the GDP Deflator, the Consumer Bundle, the unskilled wage rate, the GDP per capita, and the GDP. Descriptions of the indicators The CPI is most often used to make comparisons partly because it is the series with which people are most familiar. This series tries to compare the cost of things the average household buys such as food, housing, transportation, medical services, etc. For earlier years, it is the most useful series for comparing the cost of consumer goods and services. It can be interpreted as how much money you would need today to buy an item in the year in question if its price had changed the same percentage as the average price change. The GDP Deflator is similar to the CPI in that it is a measure of average prices. The "bundle" of goods and services here includes all things produced in the economy, not just consumer goods and services that are reflected in the CPI. The Consumer Bundle is the average dollar value of the annual expenditures of a "consumer unit". The consumer unit could be a family or another type of household. The main point is that spending is a joint decision of the members of the unit. The bundle increases over time as household income increases. Unlike the CPI, not only the cost but also the amount of goods and services increases over time. The Unskilled Wage Rate is good way to determine the relative cost of something in terms of the amount of work it would take to produce, or the relative time it would take to earn its cost. It can also be useful in comparing different wages over time. The unskilled wage is a more consistent measure than the average wage for making comparisons over time. The GDP per capita is an index of the economy's average output per person and is closely correlated with the average income. It can be useful in comparing different incomes over time. The GDP is the market value of all goods and services produced in a year. Comparing an expenditure using this measure, tells you how much money in the comparable year would be the same percent of all output. In 1900 the price of gold was $20,67 on the stock markets. http://www.measuringworth.com/gold/ If we use the CPI or GDP Deflator methods, then we get the amounts of CPI =$511,93 and GDP =438,71 in 2007 The following website gives you a calculator to work it out. http://www.measuringworth.com/uscompare/ Thus, gold is worth more today at $900 than at $20,67 in 1900.
In 1900 a lot of people who dealt with the selling of gold, especially the miners of north Georgia where I'm from (and still today do gold mining) didn't pay much attention to market value. The average price of gold even varied from one gold producing county to the next. Lumpkin County was $18/oz and the county over Hall was $19/oz. The most common for this area was around 1900 was $18/oz. I've heard some say that the only thing that has really changed over the past century is the numbers and you can still about buy today with one ounce of gold the same as you could back in 1900. Turns out.... With some research I found the following: What one dollar was worth in constant 1991 dollars. 1820-1850 $13.28 1850-1875 $13.14 1875-1900 $14.85 1900-1925 $11.38 1935 $9.91 1945 $7.56 1965 $4.31 1975 $2.35 1985 $1.26 1991 $1.00 If you average $11.38 + $14.85 = $13.12 Therefore $1.00 in 1991 equals approx $13.12 in 1900 $1 in 1900 (@ $18 / oz) would buy 1/18 oz. $20 in 1991 (@ $360 / oz) would buy 1/18 oz. $51 in 2008 (@ $918 / oz) would buy 1/18 oz. So if my figuring is correct at 20 times - the price of gold should be $262.40/oz. in 1991 = $97.60 less than market and at 51 times - the price of gold should be $669.12/oz in 2008 = $248.88 less than market. http://www.bestcoin.com/Historical-Dollar-Value.htm This would be my best guess how to work it out. Hope it helps some. But alway remember what Ben Franklin said "This country has a lot of good 5 cent cigars...problem is they all cost you a quarter. What this country really needs is a good 5 cent nickle!"