Randomness (r_ness) wrote,
Randomness
r_ness

An interesting oddity of the current gold price and the sterling to dollar exchange rate.

Expressed in gold, the value of a British pound today (07 August 2011) is just about the value of a British penny during the period of the gold standard (1844-1914). Put another way, today's pound is 1/240th of the value in gold of a pound during the period of the gold standard.

There's no actual economic significance to this particular level of inflation. 240 to one is only interesting because it was the number of pence in a pound in the old pre-decimal British monetary system. But to me it's interesting trivia.

It's something like a stopped clock, but one where the time just passed noon.

In pictures:
When it was struck, this coin had the gold value that
this coin has today.

The exact calculation goes like this: a gold sovereign contains 0.2354 troy ounces of pure gold. There are 240 pre-decimal pence in a pound. So for a present-day pound to be worth what a penny was in 1914, the value of that gold standard pound must be 240 present-day pounds. For the gold value of a sovereign to equal £240 in current pounds, one troy ounce of gold must be valued at £1,019.54 (240/0.2354). With the pound at US$1.64145 (xe.com) that is equivalent to a dollar price for one troy ounce of $1,673.53 (1,019.54 x 1.64145).

Gold has recently cleared the $1675/oz. level (kitco.com), so the value of the gold standard pound has just exceeded £240. Both the price of gold and the exchange rate between US dollars and British pounds fluctuate.
Tags: money
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