The Real Price Of Gold

Posted by Derek Tomczyk on Feb 20, 2013 - 12:00am

This article attempts to find a way to value gold and then in turn compare this value to current gold prices.

The Real Price Of Gold

While I try to stick to the facts throughout the rest of the web site the blog is the "unplugged" piece and is entirely my personal opinion which is very likely wrong and should definitely not be used for making investment decisions.

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Feb 20, 2013 - 12:00am

The Real Price Of Gold

The best way to think about gold price is to think in terms of exchange rates with gold being just another currency. The "Purchasing Power Parity" theory tells us that if the nominal price level increases in one currency (assuming no price level change in the other currency) then the exchange must deteriorate in favor of the other currency by the same percentage. In other words, the real exchange rate should always be static.
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