15 000 dollars an ounce of gold. How ?
The largest percentage of the amount of gold is held by world central banks in the form of reserve.
Governments print more currency to pay the bills.
Governments take on more obligations that require more debt.
Another aspect that led to the appreciation of the value of gold is declining production, because gold deposits are fewer and extraction process thus more expensive.
Gold is a form of protection against inflation. Why?
The price of gold is closely related to the evolution of money supply, ie the amount of money in the economy.
Example : 1% growth in the U.S. money supply lead to a 0.9% increase in the price of gold, and from 2008 until now the FED has created four times more paper dollars than in its entire existence of almost one hundred years.
So gold can cover all existing banknotes dollars now on the market value should reach 15 000 U.S. dollars an ounce
Let’s see the data that statistic provides us:
After 1933, Federal Reserve Notes and deposits were no longer redeemable in gold coins to Americans; and after 1971, the dollar was no longer redeemable in gold bullion to foreign governments and central banks. The gold of Americans was confiscated and exchanged for Federal Reserve Notes, which became
legal tender; and Americans were stuck in a regime of fiat paper issued by the government and the Federal Reserve.
After the Bretton – Woods Agreement in 1971 gold and the dollar fluctuated independently.
We then compare the two instruments ability to retain value over time. We consider data from 1971 to today, money supply in the U.S. and other parts of the world increased by about 20-30 times, while inflation has increased 4-5 times.
Thus, the purchasing power of the dollar and other currencies has fallen by over 80%. What you could buy in that time with 1 dollar you buy now with 5 dollars.
During the same period the amount of gold existing in the market have not even doubled. from 90 000 100 000 tonnes to 170 000 tonnes.
Exchange price of gold has exceeded $ 1,200 per ounce appreciate it more than 26 times in the last 40 years.
What is our conclusion?
That gold is a better investment than other currency. While the purchasing power of currencies fell dramatically, gold value was not influenced by inflation or other economic phenomena. So buy gold and silver while is still cheap today.
