Gold as a metric

Reader comment on: Buffett on the Dollar and Gold

Submitted by Lyle (United States), Feb 9, 2012 10:22

If you take the 1932 price of gold at roughly $20/ounce you get a factor of 90 since then, and 48 since Nixon. So Buffet may be a bit high using the gold price. If you try silver the ratios are a bit less. Note that silver has been influenced recently by the drastic decline in demand for film which relies on silver. But you get a ratio of around 33 using silver. One can do the ratio with any number of commodities, but supply demand issues pop their heads up, which of course they do with gold as well the 1890s had a large supply of gold come in resulting in the relative price of gold declining.

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