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Buying Power of Gold versus Barrel of Goods chart

A very close and Statist friend of mine is also a goldbug (go figure). He’s been one of the brains behind trying to find various ways to plot gold versus other goods — my idea of charting gold versus consumer goods fell through because the work was more than I could handle on my schedule that changed each week. We’re still hoping to get a few dozen people around the country to submit their own data each week, but it is still a big responsibility that gets thrown off if people miss their marks.

We were talking late into the night last night and he made a good point — how would the gold versus barrel of goods chart differ if we set gold to an unchanging number? I spent a little time this morning adding a few more fields to my spreadsheet. Instead of just having the price of gold fluctuate, I took the average price of gold over the term of the chart (a changing average each day), took the actual day’s close of a good (say oil), subtracted it from that day’s gold closing price, and added it to the average. I’m no math whiz, but I think this would give us a good idea of what prices are like if gold was considered a constant. If you can think through my calculation process, let me know if this idea isn’t correct.

Read this entire article at the gold investment site.