All the Gold in the World...
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- Created on Friday, 26 October 2012 15:43
- Published on Friday, 26 October 2012 19:45
- Written by Sara Nunnally, Editor, Inside Investing Daily
- Hits: 415
I have some bad news... Gold will never be the world's money again. For all the gold bugs out there hoping that we'll go back to a gold standard, this might come as a shock to you.
But there's just not enough of the stuff.
If we pooled all the gold in the world – the stuff already pulled out of the ground for coins, jewelry, circuitry, and anything else we've used gold for, plus the stuff still in the ground, and even the stuff under the oceans, we'd have about $12.29 trillion-worth of gold.
Has anyone checked our nations debt recently? We're headed for $16 trillion. All the gold in the world wouldn't even cover our debts, let alone back the amount of currency in our system.
Even if you added in all the silver and platinum on the planet, the total value of all this precious metal would be $14.8 trillion.
But let's just stick with gold, and U.S. money. Here's some math for you.
There are more than 7.5 billion ounces of gold in the world. Now, the U.S.' monetary base as of October 17, 2012 is $2.62 trillion. That's just all the actual printed money and coins in our economy.
In other words, that's the lowest figure of "money" the Federal Reserve tracks. It does not include checking or savings accounts, money-market funds, or other long-term obligations. So for simplicity's sake, if we just backed our monetary base with gold, one ounce of gold would back $343.33.
That may seem like a big drop in gold prices, but it's a gain of 958% since we went off the gold standard.
Our M2 money supply, which includes these other forms of money, sits at about $8.75 trillion. That figure means one ounce of gold backs $1,166.67, a gain of 3,435%.
Remember, this is every single ounce of gold every mined, and those ores still in the ground and under the ocean.
If we just went with all the gold we've ever pulled out of the ground, one ounce of gold would back $1,627.60.
And that's just U.S. money!
Keeping this in mind, gold looks pretty cheap right now. Add our M2 and debt together and mined gold backs $4,417.78... a gain of 13,287%.
With these kinds of figures, it's no wonder that smart folks like Ian Gordon, president of Longwave Analytics, says that gold is the best investment until governments deleverage their debts. Or that Eric Sprott, CEO of Sprott Asset Management that has 80% of its assets allocated to gold and precious metal, told CNBC last month:
I never wouldve imagined when I got involved in gold that I would have the benefit of kind of irresponsible money printing, bank runs that are ongoing as we witnessed in the various countries in Europe, and those two ingredients along with the QE3 which has been announced I think will be a huge tail wind for gold and other precious metals to go higher.
Gold is up slightly today as the rest of the markets are down. My Macro Trader subscribers are positioned in a gold bullion asset and a mining company. Both are long-term holds looking into a dark economic future.
Our entire planet's resources of gold wouldn't cover our debts, let alone back our money supply. And that's why gold investors are stocking up on assets. Gold has real value, and short supply, and a global economy that's starting to realize both.
Editors Note: you can get into these plays by clicking here.
Happy Investing,
Sara
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