Annual salary 200oz of gold in 1966 of some random guy on Seeking Alpha
Gernerally there exist paper contracts that promise or track the price of gold.
According to Lynette Zang, who claims to be quoting the bank of international settlements:
Per 62.000 ounces of “paper gold” there is only 1 ounce of physical gold existing
Probably taken wildly out of context…
She also claims repeatedly that in times of peak crisis 25 ouces of gold buy you an entire city quarter / city complex whatever that exatly is supposed to mean
Other approaches:
in 1900 one ounce of gold was roughly 20$
In 1900 one dollar was 1/30th of a dollar in 2020
https://www.in2013dollars.com/us/inflation/1900?amount=2000
So that means that the dollar lost 30 times purchasing power
So if gold kept it`s purchasing power in dollars, so in dollars an ounce of gold must be 30 times more in dollar terms
So if an ounce 1900 is 20$, then 2020 it should be 600$
BUT in 1900 people where doing less activities, so they needed less things
So if you take the Global GDP of 1900 and bring it on to a per capita GDP of 2020, then ist roughly a multiple of 6
https://en.wikipedia.org/wiki/List_of_regions_by_past_GDP_(PPP)
The values are measured in PPP which means Purchasing Power Parity, which could mean something like inflation and other factors adjusted currency
So a 1913 per Capita World GDP was 1543PPP
The 2019 per Capita GDP was 9663PPP which is 6,26 times more
This is per capita, which means per human
-> So if gold was to be the one currency, then multiply the Dollar adjusted Gold price 2020 Which was above 600$ by 6,26. Then the fair gold price would be 3757$
But then see that humanity grew as well. The money needs to be there for all the humans to exchange value.
From the same World GDP website we see that the total GDP measured in PPP was in 1913 2767PPP and in 2019 it was 73640PPP. So that is an increase of world Purchasing Power of 26,61 times.
So if we multiply the 600$ inflation adjusted gold price by 26,61 we come to a gold value of 15968$ in 2020.
2 thoughts there:
If we take into account that the amount of gold mined increased by a lot in this century we have to lower the value of the gold by the percentage of new gold that came to the table during this century.
I read somewhere that 61% of gold was mined after 1950 or 1960, so for the sake of lazyness I assume now that 66% of the gold mined was mined after 1900. (For my GDP values I took values from 1913 and not 1900 and also the target year was 2019 and not really 2020, where money supply went crazy again, so as a rough narrowing down to the truth I say 66% of gold is new. And I took the value on a per human basis from 1900 to now, so then I have to be fair and divide the 15968$ by 3 which is 5322$
Also it assumes that gold stayed in the same relation relative to other currencies of purchasing power transporter medium as it was in 1900.
But we now have for example bitcoin (just as an example) and probably others. So if the bitcoin people say bitcoin could go to 100.000$, then this purchasing power medium (or currency) takes market share away from gold. If gold regains value against the dollar, because the dollar was overly used as a currency and gold was not, then gold actually takes back some of the share from the dollar.
So the purchasing power of gold is always only reflecting its share of the medium of exchange “cake” when used as a currency (not money). When other currencies are more used and gold is not needed in this realm (to exchange goods and services) as much, then the price of gold in these other mediums of exchange goes down. When the other currencies loose confidence of the people, then and award this missing trust to gold, then the price of gold calculated in the left currency gains in value.
So it is its market share of purchasing power that determines the price of a currency in another currency.
So the argument that gold is real money therefore means more that the amount of gold is trackable, it´s expansion is understood by market participants, it has been useful as a currency for a long time, it has a wide adoption amongst all of humanity in most cultures etc etc… And it exists in itselb and is not a liability of anyone elses balance sheet. As opposed to the dollar, which is a liability on the balance sheed of the central bank FED.
It is the same arguments that give value to every currency: Network effect, adoption, scarcity, confidence. It´s basic logic.
Nothing is worth anything, and for sure gold is no exemption there. It has been referred to as gods money and other BS, which is not a scientificly graspable value proposition.
So if bitcoin (or other stuff) now gains a significant market share of the purchasing power cake, it has to somehow take it away from another currency. That can be either from gold, or from the dollar as well, so it´s not too clear if a rising bitcoin should mean a sinking gold in purchasing power terms, or if they both just exclusively eat away from the dollar.
Another thought:
We cannot just say that money supply in general has to be converted into the gold price and that is its fair value. A vast amount of this drastically grown money supply buys phantasy products in the global derivates market that almost no one needs and even fewer have even heard of. So if gold takes over market share in purchasing power it will not take purchasing power out of this phantasy financialized market that has this high volume of phantasy dollars. And the more this financialized system shrinks, it will also take away these phantasy products and not just give all the nominal dollar value over to gold. It could, but that would mean hyperinflation in the real economy, and would only be a nominal value gainer for gold, not a purchasing power gainer. Somehow the flood of money supply stayed relatively exclusive in the financialized world (except the occasional and unfair purchase of a super yacht, a private jet, a luxus mansion here and there by participants of the financial system) and has not gotten into full hyperinflation in the real economy. Remember, we read that the dollar only lost 30 times its purchasing power which is 30$ in 1900 is one dollar in 2020. It´s not as much as money supply has increased actually.
When will gold reach the fair value?
The whole financial system is a liquidly and constantly flowing system, that has misallocations, mathematically calculatable fundamental values based on a certain set of economical relations and trends and opinions of participants. It is a complex system. At the end it comes down to everything gets value by definition and adoption. There is no real value for everything, it is in the eye of the beholder.
So the more beholders see something a certain way, other people may jump on board, because they want to exchange value with these beholders.
So in addition to all the mathematically calculatable relations it is always also the psychologcal acceptance of this value that is neccessary to bring it actually into operation.
So gold will probably get a bigger share again in the purchasing power cake that we spoke of and therefore gain value as opposed to other currencies, namely the dollar. On this rise it may very well overshoot the calculated value, also vastly. Then again depending on the time it takes, if the dollar is inflating more at the same time, the price gold has in dollars will be a different one.
So it is a question of how fast will gold take on more participitation in the purchasing power economy, how much will it be overbid, because people want to get their hands on it in a short amount of time and it is not physically available in the same quantity. How much of purchasing power leaving the dollar will go to alternative currencies.
Given the current economic crisis, the speed of information exchange (youtube etc) it could now go fairly quick, because more people start to understand they are being ripped off unfairly just as a result of a simple power grab by unfair players in the fiat currency system and they therefore want to get some of their wealth into a system that relies more on economic principles than the fiat currencies.
So if not more brainwash or pure force is setting this trend back, gold and probably also bitcoin will be more sought after than in the past and will therefore gain value now for some time.