What Is The True Value Of One Ounce Of Gold?

Gold has always been the backstop for currency throughout the world, until fairly recently. Some believe that gold isn’t that important anymore since the advent of “electronic” money. Others believe that the whole financial system will eventually be forced back onto the gold standard. Knowing the real value of one ounce of gold and how that compares to the US dollar may just settle the debate once and for all.

Tons of money by pfala, on Flickr
Creative Commons Attribution-No Derivative Works 2.0 Generic License  by  pfala 

Anyone can get the current spot price for one ounce of gold by checking any number of online resources that deal with commodity markets. But the real value is in the comparison to cash money, both foreign and US currencies. The genuine value can be found in the purchasing power. By comparing three different “currencies”, it should become clear which one is of greater value.

The Russian ruble, for example, is presently equal to $.03 in US dollars. Gold is currently $1395 per ounce. A person would need 46,500 rubles to purchase that ounce of gold. In US terms, it would take 33.33 ruble to buy one Starbucks Vente Carmel Frappucino. Or 216.67 rubles to purchase a McDonald’s value meal. That same ounce of gold would buy 214 value meals, 328 frappucinos and 386 gallons of gas at the current national average.

The Japanese yen is currently equal to $.01 US dollars. A person would need 139,500 yen to purchase an ounce of gold. 650 yen to buy that value meal and 425 yen to buy that frappucino. With gas prices averaging 3.617 at the present time, it would cost 361.70 yen per gallon. Neither of these foreign currencies is doing well compared to the US dollar, but especially compared to gold.

The US dollar is valued at $1.00; obviously the cost of anything will be equal to that amount in dollars. The dollar is no longer backed by the gold standard, so its value exists simply because it is not questioned. With so many foreign countries using the dollar, its value is not likely to change anytime soon. However, if too many other countries start reverting to the gold standard and not relying on the US dollar, then the value of the dollar will decrease rapidly.

An ounce of gold can purchase a great many things that people want and need on a daily basis. If the financial system was run of a gold system, an ounce of gold would be equal to:

386 gallons of gasoline ($3.617 per gallon)

328 frappucinos ($4.25 each)

214 value meals ($6.50 each)

2.79 months of rent ($500 per month)

13.95 months of cable TV ($100 per month)

This list goes on and on. Simply by comparing these three currencies to gold it becomes clear that one ounce of gold is far more valuable than any of the currencies mentioned. Moving back to the gold standard is the topic of much debate among several different countries. Whether the US will be forced back to the gold standard or not is undecided, but certainly the value is there.