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An interesting exercise to determine what the objective price of gold should be in dollars terms is to ask what exchange ratio would be required for the Fed/Treasury to redeem every dollar for gold without running out of gold until the last dollar had been tendered for specie. (The Fed/Treasury claims to have 261.5 million ounces of gold.)
I have been updating a chart to follow this trend for many years now. But here is the bottom line for the Monetary Base, M1, and M2.
The Monetary Base consists of balances by member banks in reserve accounts at the Fed plus money in circulation.
M1 consists of money in circulation plus checking deposits at banks.
M2 consists of M1 plus savings deposits and money market mutual funds.
Monetary Base: $23,000 ($6.104 trillion divided by 261.5 million ounces of gold)
M1: $79,000 ($20.567 trillion divided by 261.5 million ounces of gold)
M2: $84,000 ($21.840 trillion divided by 261.5 million ounces of gold)
The current market price of gold in dollar terms, per today's Wall Street Journal, is $1,913.
Draw your own conclusions.
