# How to Price in Gold

Daniel Rigby wrote to me recently to ask:

This may seem like a dumb question, but I am unsure of how to actually price things in gold myself. Is it on a per gram basis? Could you provide me with an example of how to price something in gold, say dollars?

Thanks for asking, Daniel! That's a great topic that I haven't covered lately.

The exchange rate between dollars and gold is most often published in the form of US dollars per troy ounce of gold. If you take the price of anything in USD, and divide it by the price of gold in USD/oz, you will get the price of that thing in ounces of gold.

I prefer to use grams instead of ounces, as this allows quoting small prices (a few cents to a few dollars) in mg, large prices (tens of thousands to millions of dollars) in kg, and really big numbers (billions and trillions of dollars) in metric tons of gold, just by sliding the decimal point around.

To get the price of one dollar in grams of gold, take the price per ounce, and divide it by 31.1034768, the number of grams in one troy ounce. Then divide the USD price by that to get the price in gold grams.

If you are looking for a historical price, let's say, to find what you paid for a house in 2003, you need to get the price of gold on the purchase date, and use that for the conversion. My favorite web source for "recent" gold prices (back to 1968) is the LBMA (London Bullion Market Association). Their website publishes the London AM and PM fixings for gold, which are widely used. This page also gives prices in GBP and EUR for dates since 2000.

For example, suppose you purchased 100 shares of the DIA ETF on March 15, 2004, for 112 USD per share. Your total cost in dollars would be \$11,200. To find your cost in gold grams, first find the price of gold on March 15th, 2004; on that date, gold was fixed in London at \$399 in the morning, and \$398.10 in the afternoon. Let's choose the London PM fix for this example. If we divide 11,200 by 398.10 we get the price of the shares in ounces of gold: 28.134 oz. To get the price in grams, we would divide 398.10 by 31.1034768 giving 12.799, the price of 1 gram of gold, and then divide \$11,200 by that to get 875.05 gold grams. (BTW, at todays close, those shares were worth \$10,831, pretty close to the original purchase price… but only worth 257.67 grams of gold, a loss of over 70%, due to the falling value of the US Dollar!)

Of course the easiest way to do conversions, if you have an iPhone or iPod Touch, is to get the free Priced in Gold app! The universal version, which works with iPad as well, should be in the store shortly. It's also a great way to keep in touch with this blog, and access charts and other information when you're on the go.

Hope this helps!