How much is gold really worth? The answer we get depends on who we ask and what their opinion is. Everyone has an opinion as to what something is worth, whether the object of consideration is their home, a late grandfather’s pocket watch, or a specific stock. In that respect, gold is no different.Â
The price of a specific item or asset at any given time is a reflection of all those varying opinions. Some are based on fundamentals, some are based on technical factors. But the combination of all the opinions, and the resulting expectations (some expect the price to go up, others expect it to go down or remain the same), plus all of the other known factors at the time that might possibly impact the price, provide us with the clearest possible indication of current value for the item in question: its market price.
If we believe that gold is money, then we likely will have a different opinion or expectation than someone who sees gold as an investment; or someone else who deems gold to have no useful value.
If we don’t believe that gold is money, then we are saying that something else is. That something else, practically speaking, is fiat, paper currency issued by a government or central bank (dollars, euros, yen, etc.).
With that in mind let’s rephrase our original question. In other words, “How much is money worth?” In the simplest of terms, money is worth whatever it can be exchanged for. The value of money is in its purchasing power.
With that fundamental understood, then the logic is reasonably simple. Gold (or any other money) is worth what we can buy with it.
So, what can we buy with it? And how do we know that the value of our gold/money is realistically priced?
With gold currently priced at $1240.00 per ounce, the value of gold today is what we can buy with twelve hundred forty dollars.
But is $1240.00 per ounce today realistic? Or rather, are there reasons why we might expect that price to rise or decline to any substantial degree that would influence our choice to hold money in gold vs. U.S. dollars?
