Earlier this month, my friend Hugo Salinas Price emailed an interesting story about a single gold coin that that he still holds dearly.
Story of a Gold Coin by Hugo Salinas Price
As I was shuffling papers in some old files, I came across a slip of paper on which I had written down the price I had paid for a Mexican $50 gold peso coin: 717 Mexican pesos.
Judging from the price, I figure that the purchase was made sometime in 1972, when the price of a Troy ounce of gold was $46 dollars. The Mexican $50 gold peso coin contains 37.5 grams of pure gold, and 37.5/31.1 grams per Troy ounce, is 1.206: so there is 1.206 times more gold in a Mexican $50 gold peso piece, that in a Troy ounce of gold.
Thus, $46 dollars per ounce x 1.206 = $55.48 dollars as the value of the gold in the $50 gold peso coin, in 1972.
The rate of exchange Dollar/Peso in 1972 was 12.50 Mexican pesos per dollar, so $55.48 US x $12.50 = 693.50 pesos. I paid 717 pesos, because gold coins are always sold for a small percentage more than the price of bullion gold; in this case, the surcharge was for 3.4%.
The international price of an ounce of gold, as of November 30 was $1,222.10 dollars. The rate of exchange was at 20.40 Mexican pesos per dollar. So today’s price of the Mexican $50 gold peso coin should be close to $1,222.10 x 20.40 x 1.206 = 30,067 pesos. The quote this morning is: 30,890 pesos.
So my investment of 717 pesos, made 46 years ago, has turned into an investment worth 30,890 pesos today. Looks like a good investment.
But there’s a lot more! Because back in 1993, our President Salinas de Gortari chopped three zeroes off the rate of exchange. So actually, the 717 pesos I invested turned into 30,890,000 of the old pesos!
Mexico has a brand-new President. Nobody has any idea what the peso/dollar rate of exchange will be, when his term is over in 2024. I really don’t care, for I don’t expect to live another six years. But for the time being, I am not selling my $50 gold peso coin.
Hugo Salinas Price
Mish Comments
In an email exchange Hugo informs me “I have been long gold since I was 10 yrs old. And I still am, long gold. Amply rewarded, at the present price. However, I may live to see much higher prices.“
I believe much higher prices are coming, sooner, rather than later, as confidence in the Fed and central banks in general dives.
Mike “Mish” Shedlock
This article was originally published at Mish Talk.
