By Akin Oyedele
Gold may be worth more than what traders have decided is the spot price.
There's a correlation between gold price changes and the rate at which central banks bought assets to expand their balance sheets, according to Deutsche Bank's Michael Hsueh and Grant Sporre.
And the pace of balance-sheet expansion — by 300% since 2005, according to the analysts — indicates that gold could be worth more.
They wrote in a note on Friday:
"Let us be clear; we are not saying that gold will trade up to USD1,700/oz in the near term, but when viewed against the aggregated balance sheet of the 'big four' global central banks (the Fed, ECB, BoJ and PBoC) the argument can be made if we view gold as a currency, the metal is worth closer to USD1,700/oz, versus the spot price of USD1,326/oz."
To be sure, this isn't an argument for gold as a currency, and there are arguments against that notion. For one, gold isn't a legal tender that's widely paid or received in exchange for goods and services, partly because it's not as easy to print or transport as paper cash.
But the argument that Hsueh and Sporre make is that gold price percentage changes have historically moved in tandem with the rate of central bank balance-sheet expansions, but gold is not keeping up right now: