“In January of this year I published a piece on the “fair gold price” in order to demonstrate that, if one was to simply treat the gold of all international central banks as the world’s true, reserve currency – as history has held it as for over hundreds, if not thousands, of years – then a logical calculation would place the value of gold at an astonishing $10,617 an ounce. Compared to gold’s price of $1,675 back then, this was a significant revaluation.
The fair gold price can be calculated by the use of James Turk’s Gold Money Index formula:
Fair Price of Gold (per ounce) = Total Central Bank Foreign Exchange Reserves / Total Central Bank Gold Reserves
As I attempted to explain in my January piece, there is nothing surprising about the formula: it compares the gold bullion reserves of the central banks with their foreign currency reserves.
I concluded by asking what would happen to the market/spot price of gold if central banks around the world started to slowly, or quickly, divert their foreign currency reserves – over $10 trillion’s worth – into gold.”
Read the complete article at GoldMoney here.
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