Wednesday, June 16, 2010

Back-Of-Envelope Calculation Yields Five-Digit Gold Price

Dr. Alex Cowie of Diggers & Drillers has come up with a number that he calls the "centre of gravity" for the gold price. Dividing the U.S. public debt by the amount of gold held by all central banks, he comes up with a figure of US$27,163 per ounce.

If figures like these keep popping up, the ones that peg gold's restored-standard value at $5,000-$5,500 will look conservative. Cowie didn't explain why he used the public debt figure; the ones in the 5000 range tend to use M1 or the monetary base as the numerator.


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