Gold Value Historically

[JohnA]

I was watching this video on the creation of the Federal Reserve. => https://www.youtube.com/watch?v=lu_VqX6J93k

Somewhere in the lecture he says that the actual value of gold hasn't changed in 2 thousand years or more. A roman could buy a nice suit of clothes and sandals for an ounce of gold. And today someone could buy a very nice business suit and shoes for the same ounce. I'm not sure of the price comparison there.

So, I guess to put it in simpler  terms, with 1/10 oz of gold you can take 4 people out to dinner, figuring about $130. So let's say in 1890, could a person also buy dinner for 4 with a 1/10 gold piece? 

With paper currency, inflation has stripped the value of money. Not sure if this also applies to silver value over the years.

 

[dicker]

I think that this is roughly right but of course depends where you are. 1 oz of gold buys much more in Thailand for example than New York 

The value of gold versus Fiat currencies is hotly debated and there has been lots of discussion about why the price of gold is not higher given QE which debases Fiat currencies 

lots of opinions about this will exist, as well as speculation that gold prices are being suppressed 

 

best 

dicker

[Xander]

3 hours ago, JohnA said:

I was watching this video on the creation of the Federal Reserve. => https://www.youtube.com/watch?v=lu_VqX6J93k

Somewhere in the lecture he says that the actual value of gold hasn't changed in 2 thousand years or more. A roman could buy a nice suit of clothes and sandals for an ounce of gold. And today someone could buy a very nice business suit and shoes for the same ounce. I'm not sure of the price comparison there.

So, I guess to put it in simpler  terms, with 1/10 oz of gold you can take 4 people out to dinner, figuring about $130. So let's say in 1890, could a person also buy dinner for 4 with a 1/10 gold piece? 

With paper currency, inflation has stripped the value of money. Not sure if this also applies to silver value over the years.

 

Go to Mcdonald's, feed a family of 4 and you would get change back for 1/10 oz of gold. Not sure about 1890, although they do say poverty was 80% worldwide back then and now it's down to 10%.

[sixgun]

Poverty is often a relative thing. Some defined as living in poverty go to McDonalds for a Happy Meal and then light up a smuggled fag walking back home, via the off licence for a can of Kestrel Super Strength. i expect the level of poverty is much higher than 10%. I see in 2017 it said 20% of the people living in the UK are in poverty.

i have seen the quote for the Roman toga and sandals - then i have tried to discover where this comes from and drew a blank. i have thought that a toga and leather sandals for 1oz of gold seemed very expensive. i have a feeling this is a fictional account. The Roman centurion was said to get paid 1/10th oz of silver per day. The gold to silver ratio was about 12 in Roman times. So it would take 120 days for a Roman soldier to earn 1oz of gold. By today's standard he would be earning $1.6 per day paid in silver or $10.40 paid in gold.

When you look at those numbers something is seriously wrong with the price of gold and we see why silver is called the most undervalued commodity on the planet. This is why my stack is very heavily weighted towards silver. Silver is stupidly cheap.

[JohnA]

3 hours ago, Xander said:

Go to Mcdonald's, feed a family of 4 and you would get change back for 1/10 oz of gold. Not sure about 1890, although they do say poverty was 80% worldwide back then and now it's down to 10%.

I was thinking more like Red Lobster

[Bumble]

One of the fun things about reading the Sherlock Holmes stories is the references to monetary values in the 1890s. Gold sovereign coins were still in circulation and were worth their face value of £1. A typical annual salary for a live-in governess was £60, while a salary of £100 per year was high: high enough to be able to afford foreign holidays. £350 per year was described as a gentleman's income, i.e. sufficient to run a large house in the country, probably with a small staff, such as a cook, maid and gardener.

The gold sovereign itself is a good measure of value. Up until 1914 it was worth £1, while now it is £240. That gives a pretty good idea of how much the purchasing power of sterling has declined.

Another interesting fact is that in 1971, when the Bretton-Woods system came to an end, the average house price in the UK was equal to about 250 Toz of gold, and it still is.

[JohnA]

3 hours ago, Bumble said:

One of the fun things about reading the Sherlock Holmes stories is the references to monetary values in the 1890s. Gold sovereign coins were still in circulation and were worth their face value of £1. A typical annual salary for a live-in governess was £60, while a salary of £100 per year was high: high enough to be able to afford foreign holidays. £350 per year was described as a gentleman's income, i.e. sufficient to run a large house in the country, probably with a small staff, such as a cook, maid and gardener.

 

is 1 sovereign about 1/8 oz gold?

By your examples the gold value has gone down. Since 1/10 oz would be like a days pay now for a good salary and 3 days pay back then. I think.

[sixgun]

325k 

3 hours ago, JohnA said:

is 1 sovereign about 1/8 oz gold?

By your examples the gold value has gone down. Since 1/10 oz would be like a days pay now for a good salary and 3 days pay back then. I think.

A sovereign contains 0.2354 troy ounces of gold. So nearer 1/4 oz.

A good salary is not 1/10oz gold these days - that's £100/day. I would say £500/week or £25k a year is a long way from a good salary. Maybe £100k would be borderline good to adequate.

If we imagine the value of gold in Sterling has gone up 240x compared the day's when a sovereign was worth £1 in the shops then a 'gentleman's income' would be £350 x 240 = £84k. That would not support a large house and staff. You would need three times that and more depending on where you were living. A large house would be £750k and upwards - on the traditional 3x mortgage you need £250k to buy that, so I would say the value of gold has not kept up. Gold is undervalued and silver is ridiculous. 

[KDave]

My way of looking at this, which may be incorrect;

What is the relative efficiency of producing an ounce of gold, and a suit (or meal for family of 4), compared to then and now. I don't know, but I would say a suit is many times easier to produce now than then. Farmers produce infinitely more food today than they could produce 2000 years ago. The supply of gold however is still growing by only 2% per year. Arguably an ounce of gold should buy 5 suits today (made up number), or 100 meals, but it doesn't. Why not? 

I think it has to do with the percentage of the population that are using gold as money today. Perhaps that is why an ounce of gold does not buy 5 suits, but still only buys one. Perhaps gold is undervalued in historical terms, because the majority of people are not using it as money, the demand for it is much lower per population. I have read that the supply of gold increases above ground supply at roughly 2% per year. If only 20% of the population want gold then that is 5 times more gold per person, or 1 suit per ounce of gold instead of 5. 

If at some point in the future 100% of the population demand gold again, then we can see that gold is enormously undervalued in historical terms. I say 100% because everyone desires money, and gold was money in the past, today it is not used as such by everyone, but one day perhaps it will again.  

[sixgun]

@KDave if you are running with the supply demand equation, then 2000 years ago there were supposed to be 300 million people. Let's say there are 25X more people today.

Precious metals have been pulled out of the currencies b/c this would expose how much fiat is being generated and it would restrict the amount being created. The purpose of fiat is for the banks to be able to generate infinite currency and lock humanity down in debt and then progressively steal everything of real value through interest and using the legal system to steal real property. 

Gold and silver exposes the fiat currency system. They have beaten gold down and still it exposes the GBP as worth 1/240th of its 1914 value. Imagine if gold went to what I will say is true value. We would realise the GBP was worth 1/1000th of its 1914 value or likely less. 

At all costs the gold price must be kept as far away from true value as possible. Silver is a tiny market and so less effort is needed to lever its price down. Yet $billions are sluiced through this market. It is all about supporting the USD. Every other reason is an excuse or very secondary.

[KDave]

Yes I am not sure how true it is but I had read that gold stock increases by 2% per year which is roughly population growth. If gold supply is the constant then it is demand that has fallen compared to 2000 years ago. 

Perhaps as you say through manipulation or suppression, or perhaps as I think because its competitor 'money' being FIAT has taken much of the demand in most of the world. The majority of people do not see gold as money because it doesn't function as such to them. They use currency as money, even saving it in the bank, measuring their wealth in it, ect. If we say that gold supply is roughly in line with population growth then there are the same number of ounces per person today as there were 2000 years ago then it makes sense that if gold is 1/5 of its 'true' value in terms of its role as money, that 80% of the population do not view it as such. 

Value is perception. One day people will see the true value of FIAT, but for now they see it as money. Perhaps only the minority see gold as money at the moment hence its relatively low purchasing power. This perception will change in the future we here are all banking on it. 

[PansPurse]

4 hours ago, sixgun said:

Maybe £100k would be borderline good to adequate.

Oof! And there was me thinking I was on a decent salary ?

[JunkBond]

I would call £100k adequate.

My son is on just below six figures, he is an accountant in London.

He has a ten year old car, a three bed semi and two kids. His wife does not work. He is comfortable but the money does not go far... so he tells me.

But he does like a fine single malt and a decent steak!

[sixgun]

15 minutes ago, JunkBond said:

I would call £100k adequate.

My son is on just below six figures, he is an accountant in London.

He has a ten year old car, a three bed semi and two kids. His wife does not work. He is comfortable but the money does not go far... so he tells me.

But he does like a fine single malt and a decent steak!

i took a look at what the so called average salary in London is. They say something like £38k. All i can say is it is hand to mouth. i still hold £100k is borderline good to adequate. It is certainly not good. Accepted it is easy to think in terms of what you are making or were making and it is not derogatory to anyone but i look at property prices and all the taxes, charges, bills.... Living on £38k in London - there is nothing much left over i suspect.

[PansPurse]

29 minutes ago, sixgun said:

i took a look at what the so called average salary in London is. They say something like £38k. All i can say is it is hand to mouth. i still hold £100k is borderline good to adequate. It is certainly not good. Accepted it is easy to think in terms of what you are making or were making and it is not derogatory to anyone but i look at property prices and all the taxes, charges, bills.... Living on £38k in London - there is nothing much left over i suspect.

It's complicated and a lot depends on lifestyle. I don't want to give much detail, but at one point I was living in Islington on £20k. It was fairly hand to mouth, but workable. Being relatively close to central London meant I saved a tonne on public transport. That said, saving anything one month to the next was near impossible and I wasn't exactly living the high life.

[KDave]

London is a different beast. 100K wage is an enormous amount of money elsewhere in the UK. 

[Cornishfarmer]

1 hour ago, KDave said:

London is a different beast. 100K wage is an enormous amount of money elsewhere in the UK. 

Take housing out the equation and wouldn’t be so bad.    Think housing is overvalued in U.K. compared to gold

[KDave]

Yes you are no doubt right. I do hear about higher living costs in London however, which is the argument made to pay people more for doing the same jobs there compared to elsewhere. Is there any basis for this or do they specifically mean rent/housing?

[Martlet]

16 minutes ago, KDave said:

Yes you are no doubt right. I do hear about higher living costs in London however, which is the argument made to pay people more for doing the same jobs there compared to elsewhere. Is there any basis for this or do they specifically mean rent/housing?

Other than housing, pubs and restaurants, not really any more expensive.  In fact can be cheaper because more competition.  

[Stu]

1 hour ago, Martlet said:

Other than housing, pubs and restaurants, not really any more expensive.  In fact can be cheaper because more competition.  

What have the Roman's ever given us?'? (Monty Pythons Life of Brian in case it's lost on you)