$10,000 GOLD Zero Discount Value Nears

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The Zero Discount Value (see here and here) of gold in dollars is the hypothetical price of gold that it would take fully to back all of the FED’s high-powered money (bank reserves + currency notes issued) by gold. Assuming that the 261.5 million ounces of gold that the FED notes on its balance sheet actually exists somewhere under the control of the U.S. government, and considering the high-powered money last week was 2.478637 trillion dollars, the ZDV is now $9,479. The QE2 program is causing it to go up sharply. It looks like it will crack $10,000 in 3 more weeks. At its current price of $1,457 an ounce, the gold backing is less than 15% of the FED’s high-powered money.

8:21 am on April 12, 2011