The other day I was driving my mother from the airport, and I asked her what she thought about the current price of gold, which was hovering around $4,000 a Troy ounce. She said that when she got married (in the early 1960s), the price of gold in India was around Rupees (“Rs”) 120 per “Tola” – she said she remembered it well since her father said at the time it was quite expensive, having recently gone up a lot in price (for a history of gold in India see, for example, here), but still worth owning. A tola is an ancient weight measurement unit which equals 11.6638 grams. So, rounding up, the price of 24 karat gold in Indian Rupees then was about 10 Rupees per gram. The same price today is about Rs. 12,000 per gram, so over the last 65 years the price has gone up over 1,200 fold in Indian Rupees. Of course, in the US gold was pegged and was at $36.50 until President Nixon made it float in 1971. Today (Source: Bloomberg) the price of a troy ounce of gold is around $4,200 an ounce. So, it has gone up by about 115-fold in US dollar terms. Over the same time period, the Indian Rupee has gone from Rs. 4.76 per USD to Rs. 88 per USD, or an 18-fold weakening of the currency. Surely someone who put their money in paper Rupees has lost all of its purchasing power over the last 65 years…
The full note on this important topic can be downloaded at this link: LTA Thinking -Is Gold In A Bubble