Earlier this month, my friend Hugo Salinas Price emailed an interesting story about a single gold coin that that he still holds dearly.
Story of a Gold Coinby Hugo Salinas Price
As I was shuffling papers in some old files, I came across a slip of paper on which I had written down the price I had paid for a Mexican $50 gold peso coin: 717 Mexican pesos.
Judging from the price, I figure that the purchase was made sometime in 1972, when the price of a Troy ounce of gold was $46 dollars. The Mexican $50 gold peso coin contains 37.5 grams of pure gold, and 37.5/31.1 grams per Troy ounce, is 1.206: so there is 1.206 times more gold in a Mexican $50 gold peso piece, that in a Troy ounce of gold.
Thus, $46 dollars per ounce x 1.206 = $55.48 dollars as the value of the gold in the $50 gold peso coin, in 1972.
The rate of exchange Dollar/Peso in 1972 was 12.50 Mexican pesos per dollar, so $55.48 US x $12.50 = 693.50 pesos. I paid 717 pesos, because gold coins are always sold for a small percentage more than the price of bullion gold; in this case, the surcharge was for 3.4%.
The international price of an ounce of gold, as of November 30 was $1,222.10 dollars. The rate of exchange was at 20.40 Mexican pesos per dollar. So today’s price of the Mexican $50 gold peso coin should be close to $1,222.10 x 20.40 x 1.206 = 30,067 pesos. The quote this morning is: 30,890 pesos.
So my investment of 717 pesos, made 46 years ago, has turned into an investment worth 30,890 pesos today. Looks like a good investment.
But there’s a lot more! Because back in 1993, our President Salinas de Gortari chopped three zeroes off the rate of exchange. So actually, the 717 pesos I invested turned into 30,890,000 of the old pesos!
Mexico has a brand-new President. Nobody has any idea what the peso/dollar rate of exchange will be, when his term is over in 2024. I really don’t care, for I don’t expect to live another six years. But for the time being, I am not selling my $50 gold peso coin.
Hugo Salinas Price
Mish Comments
In an email exchange Hugo informs me “I have been long gold since I was 10 yrs old. And I still am, long gold. Amply rewarded, at the present price. However, I may live to see much higher prices.“
I believe much higher prices are coming, sooner, rather than later, as confidence in the Fed and central banks in general dives.
Mike “Mish” Shedlock
Gold has definitely increased in value over time, but if you compare it with the DOW’s performance, especially with reinvested dividends, stocks have shown even more growth. While gold can be a safe bet, stocks might offer better returns in the long run. If you’re considering buying gold, don’t forget to use comparison websites like FindBullion and BullionMentor to get the best prices. It’s always smart to evaluate both investment options and find the best deals on gold!
I hope Mr. Price is not suffering poor health, because he does not expect to live six more years.
IF gold is so useless, then why dosent the Bank of Endland release Venezuela’s gold, and just sell all the useless gold back to South Africa at the SAME price that they paid for it, mostly 35 $us per oz of gold up to 1100 tons per years when it was the worlds largest gold producer, in the now 3-4 km deep Witwatersrand mines that use most of the clean water of that mega dry Country, that is running out of drinking water. To be fair, I will pay 36 $ per oz of gold, but first all the pollution that was never cleaned up in ALL the Commonwealth nations must be fully paid.
It is unlikely that governments will let gold holders walk away with billions of dollars in gains while the economy folds without expecting a lot of it back. Any time wealth is transferred from the non-ruling class, oppression follows.
They can have my gold if they don’t mind trying to take it at gunpoint. This is their mess. They will not be robbing me to fix it. Not without a fight. Americans are the most heavily armed people in the world. The NRA has 5 million paid members. The US military only has 2 million members. Nukes and aircraft carriers and bombers are for projecting force outward; they are of little use internally because the minute the government starts bombing stateside targets they will lose all support of the people and civil war 2.0 will begin. Nobody is going to win a war against American citizens on American soil. Nobody. It would be foolish to even try and I think they know that. A very small number of American patriots flexed their muscles at Bundy ranch. This was against 200 federal agents, all armed to the teeth with guns, dogs, snipers, trucks, helicopters and high tech communications gear. Everyone thought it was going to be another Waco or Ruby Ridge. But once the government realized that this was drawing national attention and that patriots were being called to the defense, the government tucked tail and ran. As the Global Debt Ponzi goes into collapse there will be even less and less money available for the government to run its police state control over the free people of the United States. Do not discount the spirit of 1776 in all of this; it is muted but bubbling just below the surface. If government tries to start something, American patriots will finish it. So their best bet at remaining both alive and in their seats of power is to not try to pick financial winners and losers with respect to gold and silver hoarders. They know this.
What I am having a hard time understanding is how obama spent trillions and loaded up debt, but we have never paid the inflation price for all the wasteful spending and debt burden. Ypu can only debase the currency for so long before things have to change. bama spent eight years of debasing the currency but we never did have hyper inflation. We did have slow to no growth. When will we be paying the price for this wasteful spending?
Patience, it’s coming.
Debt is not debasement. Not until its is monetized. Those who loaned us the money will eventually get screwed by us, just like we screwed everyone who held dollars instead of gold when Nixon defaulted on Bretton Woods 1. After that the massive inflation will come because nobody will loan us money on the cheap anymore but government appetite for spending will not go away else there will be a pitchfork revolution by all the liberals sucking at government teats. When we can no longer borrow money cheaply we will have no alternative but to print and so they will print. Additionally, the rest of the world is holding a lot of dollars and those out of country dollars could not chase up prices here in the US. But as other nations work to get out from under the US dollar global reserve currency scam they will have less and less reasons to hold dollars and those dollars will come back to the US where they will drive prices up. This will likely happen at the same time government printing presses are at full speed, thus doubling the inflation that would otherwise be present from government printing alone. And finally, Americans will lose confidence in the issuing authority of the fake money and then we will see hyperinflation.
I’m just a Numismatic Hobbyist and I really enjoyed the story . I like to collect U.S. $20.00 Liberty Head Gold pieces(not fond of St. Gaudens or G.A.E. coins) but I haven’t thought of them or any of my other coins as an Investment .Naturally they increase in value , for me they are History you can hold in your hands and share with your children and grandchildren .
Gold has always been hoarded, it never did circulate particularly well. Thus, it has been used as a store of value, and now most of it is hoarded by central banks and certain countries as a savings plan or in the central banks case, an inflation hedge. Now, what the heck are central banks worryied about inflation for. Other countries like Russia/China central banks have somewhat equal amounts and are thus in a race to keep their stacks even or close. Gold is something you buy and put away, or if otherwise wear as jewelry.
Actually, as a former numismatist, I can tell you that gold coins did absolutely circulate very well, all over the world and here in the US, where millions and millions of them were minted until FDR forbade it in favor of fiat (fake money) as soon as he became president.
Mish,
It is my understanding that you regularly advocate for gold as a part of one’s portfolio, etc. If someone had followed your advice wrt investing since 2009, how would their portfolio have fared?
Sincerely,
Jeff
How would they have fared wrt investing since 2000?
I am simply interested to see how his advice pans out.
Here are two data points for comparison:
Vanguard Morgan Fund – Growth – has averaged 7.38%/yr since 2001
Vanguard Life Strategy Conservative Fund (60% bond, 40% stock) has averaged 6.87%/yr since 1994.
How does what Mish advocates fare against such returns?
Peter Schiff constantly advocates for gold, and constantly warns about bear markets, market collapse, etc. If one followed his advice, how would they have done?
I think the idea is to mark the model to market.
Most folks who are “advertising gold” receive commissions fro BitGold, SchiffGold and what not.
Dont forget your 28% tax on precious metal gains, everyone. You can hope the governments of the world will disappear, but that doesnt mean they ever will. Sorry.
That is, of course, providing the buyer of your gold reports it to the government (not that anyone would not donate their 28%!). Try hiding stock or bond interest profits.
AGW of the Mexican 50 peso coin struck with dates from 1921 to 1947 (but actually struck until 1972) is 1.2057 oz. AGW of the US $20 gold coin struck from 1849-1933 is .9675 oz.
Yesterday I read again the old saying that an ounce of gold has always bought a nice man’s suit. Well, I know way more about Carhartts than I know about men’s suits so I was wondering what I could use as a comparison. My grandpa stated in his history that in 1929 when he was a first-year teacher, he made $85/month. At $20.67 an ounce, that comes to 37 ounces of gold per 9-month school year. I used $1,200 an ounce for gold to weed out some of the wild fluctuations of late and came up with my grandpa making the 2018 equivalent of $44,412/year. When I went to the Albany County, Wyoming school district website I discovered that a first-year teacher starts at…$44,460 per year, a difference of only $48. Needless to say, I was pretty blown away.
Good grief, Gold has gone from $46 in 1972 to $1280 today. $46 put into the DOW with dividends reinvested would now be worth $5200 or over $100M pesos. Does that coin still look like a pretty good investment?
You neglect to allow for all of the DOW index cheating since 1972. How many of today’s securities were a component part of the DOW in 1972? Please use honest scales when you analyze the situation.
Gold stood still. It’s the fiat currency that slipped away like a handful of sand sifting through your fingers.
In 1972, the DOW had the following companies in it:
Anaconda Copper, Johns-Manville, General Motors, Goodyear, Sears Roebuck, US Steel, Woolworth, Bethlehem Steel, Kodak, Chrysler and Esmark Corp (steel at the time).