Valuing gold against US external debts
Another established way to value gold is to measure what gold prices would be if debts within the financial system were settled in gold bullion.
This scenario aims to simulate a situation where investors lose confidence in a country’s currency and bond market. Such a crisis would force the debtor country to settle debts in other liquid assets trusted by creditor nations. What would this mean for the live gold price?
The most useful example to look at here is a potential collapse in the US dollar, where creditor nations would have their sights firmly trained on US gold bullion reserves. Use the slider above to see what would happen to gold prices if US gold reserves were used to settle American debts to other countries. We’ve preset the slider to current US debt numbers which seem to keep growing. Set the debt levels of your choice to see what it means for the price of gold.