In a 2011 article in the New Yorker (1), the magazine publishes one of Ray Dalios "decision rules" for when to make a trade or not. It says:
[...]over the long run, the price of gold approximates the total amount of money in circulation divided by the size of the gold stock. If the market price of gold moves a long way from this level, it may indicate a buying or selling opportunity.
Making a fast and easy calculation with the numbers 190040 tonnes of gold (2), multiplied by a million to get the weight in grams and divided by 31,1 to get the weight in troy ounces, I get the value 6110610932 as the amount of gold today measured in troy ounces.
If the amount of currency in circulation is about 5 trillion USD (3), this calculation gives me the value of 818,24 USD, and given a current price of gold today at 1300 USD/T OZ (4), this gives som credibility to the "decision rule", and indicates that gold in todays market is about sixty percent overpriced.
Do you guys think that this is correct and sound advice? Is the price of gold connected to currency this way, or is this just coincidences? Is Ray Dalio one to follow?
Submitted March 19, 2018 at 04:54AM by AlwaysStoneDeadLast http://ift.tt/2ppUryr
