GOLD 0.51% $1,391.7 gold futures

us gold: postage index

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    The increased postage cost this week made me think more about how to price gold.

    So, I went online to find out the historical postage costs in the US for comparison with the US POG. Very interesting.

    The links to the data are as follows:

    Gold: http://www.lbma.org.uk/stats/goldfixg

    Postage: http://www.akdart.com/postrate.html

    Then I noticed that the US historical postage price is quoted per ounce. My thinking juices then went into overdrive.

    I created a ratio between the USD POG and postage cost. The basis of this is that the postage cost is directly proportional to the weight of one ounce of gold.

    By dividing the POG by the postage cost I was effectively standardizing the costs of postage over time to a value of 1. That is all the labour, equipment depreciation, equipment purchases and POO used to deliver an ounce of gold were equalised.

    The resulting chart was very interesting (can't post it though as I don't know how).

    The main point of interest is the 1980 peak.

    According to this ratio the YEAR AVERAGE POG: POSTAGE COST value in 1980 remains the peak value - even compared to today's POG (i.e. 8196 in 1980 compared to 5159 in 2009).

    The same occurs for the ratio YEAR HIGH POG: POSTAGE COST (i.e. 11240 in 1980 compared to 5538 in 2009).

    Notice the range disparity between the YEAR AVERAGE and YEAR HIGH ratios in 1980 when compared to 2009. that is telling imo.

    OK so in 1980 the year high ratio coincided with POG at 843. Using these ratios to PREDICT a potential future high based on todays POG is $2,526 with a year average of $1,956. But this is not necessarily a good predictor imo as there are plenty of differences between postage efficiencies 1980 compared to 2009.

    So I decided to use the % increase from the 1980 year average to year peak as the means for predicting the the year high POG COULD have been for 2009. The following equation shows my worksings.

    Predicted 2009 POG year high = Average POG in 2009 (i.e. 1,135)* year high ratio value in 1980 (i.e. 11240)/ year average ratio value in 1980 (i.e. 8,196)

    Within this context the 2009 postage adjusted USD POG high could have been approximately $1,556.54. But the 2009 high was 1,218 nearly $340 less than this prediction.

    I'm not saying last year the POG in USD should have been $1,556.54. No that's not the message. The message is the POG: postage cost ratio 'blowoff' or parabolic rise potential for 2009 was $1,556.54.

    But because we got now where near that value I conclude that the POG still remains below bubble status. It hasn't blown off. It hasn't reached its full potential.

    The average POG in USD for 2010 remains at the 2009 levels. for the first 5 months of this year the average has been $1,136. So on that basis the potential blowoff level from here remains a target of $1,556.54. There you go, that's my year high prediction should we get a 1980s style parabolic move.

    GC
 
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