There are several different approaches to calculating a theoretical price for gold. The purpose of this essay is to calculate this figure using two different methods. For each, the total ounces of gold above ground will be divided by:
1. The total amount of currency (physical paper money only)
2. The aggregate sum of published M1 money supply (primarily currency and demand deposits) figures from the world's central banks
Amount of Aboveground Gold
According to GFMS Ltd, the aboveground stocks of gold at the end of 2007 were 161,000 tonnes. Jewellery makes up the largest component of this inventory. Much of this is in the form of 'monetary jewellery' for which the value is based upon the content of gold rather than its artistic value.
According to the September 2008 release from World Gold Council the total official gold holdings of the world's central banks and vaults of the International Monetary Fund and Bank of International Settlements is 29,783.9 metric tonnes, representing over eighteen percent of the total inventory.
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