Week 33.1 Gold vs Stock
In the above article, it stated that gold is just 0.7% of global managed assets. However, it’s difficult for me to assess how much is the global managed assets without any references, that why I come up with this article.
Singapore is 1.11% as of early 2011.
SGX had 774 listed companies with a combined market capitalisation of S$650 billion
Thus, total world stock market capitalization is
S$650/ 0.0111 = S$58,559 billion
USD to SGD exchange rate is 1.20
Thus, total market capitalization as of 2010 is $58,559/ 1.2 = $48.8
Dec 2010 market capitalization is USD1.4 trillion.
Thus, USD1.4 trillion / 0.0285 = USD49.1 trillion
Thus, the total of the world stock market early 2011 capital is USD49 trillion for simplicity of calculation.
Total above ground gold reserve is 165000 tonnes in end of 2009. Assume 2500 tonnes production in 2010.
Note: peak production is approximately 2600 tonnes in 2001.
Total above ground is 167500 tonnes or 167500 x 32150 oz = 5,385,125,000 oz
Let us summarize it to 5.4 billion oz.
Can all the above ground gold buy all the stock in the world?
The price of gold must be = 49,000/5.4 = USD9074/oz
Bear in mind we have not consider the value of the properties, car and etc owned by individuals, government owned assets and also the amount of money already printed in circulation. That also does not include all the derivatives.
Conclusion:
a) Gold is still cheap or stock market is over-priced.
If we take the mid-path, gold will easily raise to USD3000-5000/oz, stock market capitalization to drop to USD25 trillion.
b) In the future, a basket of commodities will be used as standard for currency backing. Not gold alone. It will be precious metal, oil and other commodities.
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