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What Is Gold Really Worth?
Forbes ^ | 05/12/2011 | Louis Woodhill

Posted on 05/12/2011 7:09:24 AM PDT by SeekAndFind

What is gold really worth? In one sense, the answer is obvious. Gold is worth $1,515.10/oz, because that is what it is trading for in the market as of this writing. However, all this number means is that an ounce of gold has 1,515.1 times the market value of our current, undefined, “fiat” dollar.

A deeper and more interesting question is, “What should gold be worth?” In other words, in terms of what quantity of gold would we define the dollar if we wanted to have a stable currency, a stable economy, and stable financial markets?

This is not just an academic question. The dollar is experiencing a crisis of confidence. Our undefined, unstable dollar caused the crash of late 2008, and it is the principal problem behind what is unfolding as the slowest economic recovery on record.

Right now, the dollar problem is chronic and debilitating, but it could become acute and economically life threatening at any moment. In an acute dollar crisis, Congress would be forced to act, and the action that would best address the problem would be to define the dollar in terms of gold.

The idea of defining the value of the dollar in terms of the value of a fixed weight of gold is not a radical notion. The radical—and ultimately unworkable—notion is for the dollar, which is our basic unit of market value, to have no legal definition. Our undefined, floating dollar is producing the same kind of economic chaos that we would expect if we had a “floating” second, pound (mass), or foot.

The cost of coping with this economic chaos is enormous and growing. It shows up in many different ways, including anemic real GDP growth, wild swings in gasoline prices, 9.0% unemployment, stagnating real median incomes, and rising inequality.

(Excerpt) Read more at blogs.forbes.com ...


TOPICS: Business/Economy; Constitution/Conservatism; Culture/Society; News/Current Events
KEYWORDS: devaluation; dollar; gold; silver
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1 posted on 05/12/2011 7:09:26 AM PDT by SeekAndFind
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To: SeekAndFind

Gold is worth the same as it’s always been. A high quality custom tailored men’s suit.


2 posted on 05/12/2011 7:12:21 AM PDT by Dixie Yooper (Ephesians 6:11)
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To: SeekAndFind

If I had gold, I would take what I can get now and run. It’s going to drop like a rock this summer.


3 posted on 05/12/2011 7:13:47 AM PDT by Old Retired Army Guy
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To: SeekAndFind

Gold won’t be worth more than copper when my team completes it’s atomic compositor and generates pure gold from simple raw materials. You have been warned.


4 posted on 05/12/2011 7:14:41 AM PDT by montag813
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To: Dixie Yooper

give me a pound of gold and I will give you a pound of suits.


5 posted on 05/12/2011 7:19:00 AM PDT by rokkitapps
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To: SeekAndFind

At this moment, about $1490.00.


6 posted on 05/12/2011 7:19:54 AM PDT by Gadsden1st
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To: montag813
Gold won’t be worth more than copper when my team completes it’s atomic compositor and generates pure gold from simple raw materials. You have been warned.


7 posted on 05/12/2011 7:20:19 AM PDT by SeekAndFind (u)
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To: SeekAndFind

Bernanke(BurnYankee) can do on a scale what no alchemist dared dreamed.


8 posted on 05/12/2011 7:25:19 AM PDT by central_va ( I won't be reconstructed and I do not give a damn.)
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To: Dixie Yooper
"Gold is worth the same as it’s always been. A high quality custom tailored men’s suit."

That's a ridiculous myth pushed by gold salesmen.

The price of men's suits have not gone up 620% in the past 10 years. And in the 1980's the price of men's suits didn't suddenly jump to $860 only to fall back to half of that 3 months later.

9 posted on 05/12/2011 7:25:39 AM PDT by DannyTN
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To: Gadsden1st

Good quality men’s suit $1460.00

http://www.bluefly.com/Armani-Mens-Suits/_/N-1z140jiZ7qkZapt8/designerslist.fly?referer=Rmsn&cm_mmc=EF-_-MSN-_-Sui_D_A_Arman_M-_-Dynamic&ef_id=TLGrqgqoEGMAACPE8aQAABco:20110512141415:s


10 posted on 05/12/2011 7:26:06 AM PDT by Gadsden1st
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To: SeekAndFind

Whatever one can get for it.


11 posted on 05/12/2011 7:26:23 AM PDT by onedoug (If)
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To: DannyTN

We are not talking about a J C Penny suit.


12 posted on 05/12/2011 7:27:48 AM PDT by Gadsden1st
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To: Gadsden1st
"We are not talking about a J C Penny suit."

We are not talking about any man's suit ever made.

The only suit that the price of gold actually tracks would be a man's suit made out of gold itself.

13 posted on 05/12/2011 7:29:53 AM PDT by DannyTN
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To: DannyTN

See Post 10


14 posted on 05/12/2011 7:31:34 AM PDT by Gadsden1st
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To: Dixie Yooper

Rather than a man’s suit, I would use a loaf of bread.
With bread you could go back a 1000 years if you wanted.

What was the cost of a loaf of bread when we were on the gold standard and you could pay for it with gold?

What is the cost of a loaf of bread today?
This would be the same amount gold as above.
Cost of Bread / Amount of Gold.

I may do this today if I have a chance.


15 posted on 05/12/2011 7:32:31 AM PDT by super7man
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To: super7man

Like duh.
Everything is on the internet.

Go here.

http://www.coins-auctioned.com/docs/coin-articles/history-of-gold-ounce-price-comparison-to-a-loaf-of-bread


16 posted on 05/12/2011 7:35:13 AM PDT by super7man
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To: DannyTN

In the late 50’s you could buy a gallon of gas for a couple of silver dimes. Today you can buy a gallon of gas for a couple of silver dimes and get change. Yes, I know you would have to stop at a coin store on the way to convert it. I have no interst in selling gold or silver, but denial is not good for your pocket book. I don’t understand the emotional reaction some have to the mention of gold or silver.


17 posted on 05/12/2011 7:37:19 AM PDT by Gadsden1st
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To: rokkitapps

Your comment will go down in history as THE textbook example of a MISSED POINT!

Here’s another that I’m certain will totally elude you: With the “dollar” (actually a Rederal Reserve Accounting Unit Denominator or F.R.A.U.D.) currently at 1/33rd of an oz. of SILVER, gas is now selling for around $.20 a gallon — IN PRE ‘65 90% SILVER DIMES!


18 posted on 05/12/2011 7:38:11 AM PDT by Dick Bachert (2012 CAN'T COME SOON ENOUGH FOR ME. HOW ABOUT YOU?)
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To: SeekAndFind

Contrary to popular belief, gold has very little intrinsic value.


19 posted on 05/12/2011 7:41:44 AM PDT by youngidiot (Hear Hear!)
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To: montag813
Gold won’t be worth more than copper . . .

This is the key issue. What makes gold valuable? If it's just because we decide that it's valuable - that is, if it's just because we use it as a medium of exchange - then it's worth whatever someone is willing to pay for it. There is no inherent value in the medium of exchange, only what it can get for you. That's why 'paper' dollars were 'worth as much' as silver dollars when they first came out.

It would be as logical to tie the value of the dollar to some fraction of the cost of 1 carat diamonds, or of anything else that is durable and sufficiently rare that the supply can be controlled, yet not so rare that there aren't enough of them to go around as the exchange medium.

Gold is intrinsically valuable because it does not corrode, is essentially impervious to solvents, is malleable enough to be worked easily, and shines up nicely. These features would make it useful for jewelry and some electronic applications even if it weren't used as an financial reference. In that light, it is exactly the right question to ask whether gold is "worth" more or less than copper, which is a better conductor (an inherent value) but not as resistant to corrosion or solvents.

Any 'value' statement other than intrinsic utility is artificial. Changing from one artificial way to measure value (things like commodity price of gold that is based solely on what people will pay for it), to another artificial measure (linking the dollar to the price of gold where the value is still essentially what people will pay for it), doesn't really change anything.

Linking the value of the dollar to an array of items of intrinsic value, like a specific quality car, or a specific quality men's suit, or a loaf of bread, or a gallon of gasoline would make more sense, except . . . that's what we do now.

However, there is one other key issue where dollars are different. You can print as many of them as you choose. Since the potential supply is infinite, there is nothing that can make the demand (the actual value) stable. The reason gold is trading for so much today is because there are so many dollars available to spend on gold. The reason it's an inflation hedge is because people think the government is going to make a lot more dollars without a corresponding increase in the number of gallons of gasoline, or men's suits, or loaves of bread. The reason it might make sense to link it to gold is that then you couldn't just print as many as you want (or else people would just use them to buy the more-or-less fixed quantity of gold), but if gold is overvalued right now (and I think it is) then we'd be better off linking it to something that has a more rational price in comparison to things of intrinsic value.


20 posted on 05/12/2011 7:42:17 AM PDT by Phlyer
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To: Dick Bachert

no just making a joke. I look for pre-65 quarters and dimes in my change. any pre-83 penny is worth 3 cents and any nickel 1945-2011 is worth 7 cents. save those pennies and nickels.


21 posted on 05/12/2011 7:43:05 AM PDT by rokkitapps
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To: youngidiot

“Contrary to popular belief, gold has very little intrinsic value.”

Yea, about the same intrinsic value as a well made custom men’s suit.


22 posted on 05/12/2011 7:44:00 AM PDT by Gadsden1st
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To: youngidiot

The Roman Republic/Empire survived on the Gold std for almost 800 years.


23 posted on 05/12/2011 7:44:28 AM PDT by central_va ( I won't be reconstructed and I do not give a damn.)
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To: SeekAndFind

A LOT more than the dollar!

Looks like another George Soros hit piece on Gold. Because the price of Gold has rocketed up over the last 10 years. Soros is trying to get people that are hold gold to sell. LOL!

When I read a headline like this... That means buy more gold.


24 posted on 05/12/2011 7:48:15 AM PDT by Sprite518
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To: central_va
The Roman Republic/Empire survived on the Gold std for almost 800 years.

What if they'd chosen to use seashells or hamster droppings instead? That doesn't make it intrinsically valuable.
25 posted on 05/12/2011 7:56:12 AM PDT by youngidiot (Hear Hear!)
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To: youngidiot

if they had ransacked cities and took the seashells and left the gold, I don’t think it would have worked.


26 posted on 05/12/2011 7:57:41 AM PDT by rokkitapps
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To: youngidiot

Talk to me when you are wiping your arse with $100 bills. This is very likely when we lose control of our fiat money. It is mazing the defendwers of paper money. In history EVERY currency has devalued to nothingness. This time it is different, right? LOL.


27 posted on 05/12/2011 7:58:39 AM PDT by central_va ( I won't be reconstructed and I do not give a damn.)
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To: Gadsden1st
In 2001 Silver was $4.50 an oz. Gasoline was $1.80/gal
On April 28, 2011 Silver was $48.50 an oz. Gas was $3.81/gal
On May 6, 2011 Silver was $34.00 an oz. Gas was $3.90/gal

I'm sure you can find points in history where two different commodities occasionally trade in the same ratio. But that doesn't mean that they always trade that way. Silver doesn't track gasoline, as you can see from the above examples.

Just to clarify:
2001 gasoline cost 0.4 oz of silver
Apr 28, 2011 gas costs 0.078 oz of silver
May 2, 2011 gas costs 0.115 oz of silver.

That change of 0.067 oz between Apr 28 and May 2 is an 80% increase in the price of gasoline when paid in silver. Yet gas only increased 2.3% when priced in dollars.

28 posted on 05/12/2011 8:00:24 AM PDT by DannyTN
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To: rokkitapps

I guess it was I who missed the point! Sorry.


29 posted on 05/12/2011 8:01:17 AM PDT by Dick Bachert (2012 CAN'T COME SOON ENOUGH FOR ME. HOW ABOUT YOU?)
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To: youngidiot

Contrary to popular belief, there is no such thing as “intrinsic value.”


30 posted on 05/12/2011 8:03:17 AM PDT by Erasmus (I love "The Raven," but then what do I know? I'm just a poetaster.)
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To: SeekAndFind

Gold is worth exactly what it’s always been worth. The value of gold has not changed it’s the value of the dollar that has changed. The dollar is now worth approximately 1/1500th of an ounce of gold. A speck.


31 posted on 05/12/2011 8:03:21 AM PDT by pgkdan ( "Wherever the Catholic sun doth shine / There's always laughter and good red wine / ...Belloc)
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To: FReepers
Hanging Around FR?

Become A Monthly FR Donor

32 posted on 05/12/2011 8:03:25 AM PDT by DJ MacWoW (America! The wolves are at your door! How will you answer the knock?)
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To: DannyTN

A decent suit along with a shirt tie and belt will run you about $1500.00 at a quality men’s fashion store.


33 posted on 05/12/2011 8:05:20 AM PDT by pgkdan ( "Wherever the Catholic sun doth shine / There's always laughter and good red wine / ...Belloc)
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To: Gadsden1st
High quality men's suit $1,600 - $1,900

http://www.brooksbrothers.com/IWCatSectionView.process?IWAction=Load&Merchant_Id=1&Section_Id=576

34 posted on 05/12/2011 8:05:28 AM PDT by Dixie Yooper (Ephesians 6:11)
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To: central_va
Talk to me when you are wiping your arse with $100 bills. This is very likely when we lose control of our fiat money. It is mazing the defendwers of paper money. In history EVERY currency has devalued to nothingness. This time it is different, right? LOL.

I said nothing about paper money.
35 posted on 05/12/2011 8:07:18 AM PDT by youngidiot (Hear Hear!)
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To: Dixie Yooper

I look pretty darn good in a $300 suit.


36 posted on 05/12/2011 8:07:51 AM PDT by rokkitapps
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To: Old Retired Army Guy

How long does it take to find a ounce of gold compared to a ounce of BS.


37 posted on 05/12/2011 8:09:48 AM PDT by Big Horn (Rebuild the GOP to a conservative party)
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To: rokkitapps

Or togas. Funny how that’s been true forever.


38 posted on 05/12/2011 8:12:10 AM PDT by DManA
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To: Old Retired Army Guy
If I had gold, I would take what I can get now and run. It’s going to drop like a rock this summer.

I would be interested in hearing the factors you considered to come to this conclusion.....not to argue about it, but always interested in other's thoughts on the subject.

39 posted on 05/12/2011 8:17:36 AM PDT by OB1kNOb (The stench of dependency is a sickening smell. Strive to become an asset, not a liability.)
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To: SeekAndFind
As soon as Emperor Obama raids all of our retirement accounts and realizes even that won't keep up with his spending, he will make gold illegal to own and will force everyone to sell it back to him at $32/oz. You laugh, it happened here the last time we allowed ourselves to be ruled by an Emperor.
40 posted on 05/12/2011 8:21:23 AM PDT by Dixie Yooper (Ephesians 6:11)
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To: Phlyer

Good post Phlyer.


41 posted on 05/12/2011 8:23:17 AM PDT by 3boysdad (The very elect.)
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To: Old Retired Army Guy
If I had gold, I would take what I can get now and run. It's going to drop like a rock this summer.

That would be true for a speculator. Gold and silver will recover after any summer drop for a simple reason: the Feds and the Fed have no other way to get out of this mess. If they let deflation kick in then the "recovery" will be over. OTOH, they can tank the dollar with little political or economic cost other than screwing dollar-based savers and the Chinese. They will choose to tank the dollar although it will always fluctuate and they will pretend otherwise.

42 posted on 05/12/2011 8:29:39 AM PDT by palmer (Cooperating with Obama = helping him extend the depression and implement socialism.)
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To: SeekAndFind

An appropriate place for the reminder that gold and silver coin are the only lawful money (that is, money citizens can be forced to accept by government) under the Constitution, and all of our economic problems (like so many others) would have been avoided by fealty to the Constitution.


43 posted on 05/12/2011 8:55:42 AM PDT by Buchal ("Two wings of the same bird of prey . . .")
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To: SeekAndFind
100 ozs of gold has consistently bought you a good house.
44 posted on 05/12/2011 9:17:04 AM PDT by 2001convSVT (Going Galt as fast as I can.)
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To: SeekAndFind

I think gold is over-valued right now.

In 1968 I took my first job out of college at an in-house retail ad agency at the entry-level wage of $105/week. That was equal to three ounces of gold per week at the prevailing rate back then ($35/oz).

Today, three ounces of gold a week would be $4,500/week, or $234,000 a year. Hardly an entry-level wage.


45 posted on 05/12/2011 10:28:00 AM PDT by Colinsky
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To: DannyTN

How I know this “buy gold” scheme is a scam is:
1. If you had gold, and it was so great, you would not sell it.
2. If gold is great because money is not, how can you buy gold with money?
3. In the commercials to buy gold: Money is worthless! Buy gold! (unsaid is you can buy gold with money)

TOTAL SCAM.


46 posted on 05/12/2011 10:46:37 AM PDT by Lower55
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To: Lower55
If you are not attempting a flight of irony, see Gold & Money In America

Yes, you can still buy gold with fiat currency. The problem for the buyer is that while $20.67 used to buy an ounce of gold, it now takes over 70 times that to do so. Now, just which is the truer store of value?

William Flax

47 posted on 05/12/2011 10:52:22 AM PDT by Ohioan
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To: DannyTN

I think you’re missing the point. Of course the price of gold doesn’t perfectly track any other item day to day (like a men’s suit) but over the long term, the value does.

In 1850 you could buy a fine tailored men’s suit for about one ounce of gold. In 1900, that ounce still bought a similar suit. Same in 1950, 1980, and 2011.

The value of gold, like any commodity, does not change over time. It is not an investment. It is a store of value.

Compare that to taking that same ounce of gold in 1900 and using it to buy stock in IBM.


48 posted on 05/12/2011 11:04:37 AM PDT by Ramius (Personally, I give us... one chance in three. More tea?)
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To: DannyTN

The price to which you refer lasted but a few days and was an outlier that is not a valid consideration


49 posted on 05/12/2011 11:09:51 AM PDT by bert (K.E. N.P. N.C. D.E. +12 ....( History is a process, not an event ))
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To: super7man

-——What was the cost of a loaf of bread———

Bread is sold by weight and is an American scandal. The moisture content has been pushed upward until the current product is dough. The price has been maintained by increasing the water content


50 posted on 05/12/2011 11:12:56 AM PDT by bert (K.E. N.P. N.C. D.E. +12 ....( History is a process, not an event ))
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