Story of a Gold Coin

Here's a true story of one gold coin, a 50 Pesos gold coin like that pictured above.

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

Comments
No. 1-11
shamrock
shamrock

Good grief, Gold has gone from $46 in 1972 to $1280 today. $46 put into the DOW with dividends reinvested would now be worth $5200 or over $100M pesos. Does that coin still look like a pretty good investment?

St. Funogas
St. Funogas

Yesterday I read again the old saying that an ounce of gold has always bought a nice man’s suit. Well, I know way more about Carhartts than I know about men’s suits so I was wondering what I could use as a comparison. My grandpa stated in his history that in 1929 when he was a first-year teacher, he made $85/month. At $20.67 an ounce, that comes to 37 ounces of gold per 9-month school year. I used $1,200 an ounce for gold to weed out some of the wild fluctuations of late and came up with my grandpa making the 2018 equivalent of $44,412/year. When I went to the Albany County, Wyoming school district website I discovered that a first-year teacher starts at…$44,460 per year, a difference of only $48. Needless to say, I was pretty blown away.

stillCJ
stillCJ

Editor

AGW of the Mexican 50 peso coin struck with dates from 1921 to 1947 (but actually struck until 1972) is 1.2057 oz. AGW of the US $20 gold coin struck from 1849-1933 is .9675 oz.

jivefive99
jivefive99

Dont forget your 28% tax on precious metal gains, everyone. You can hope the governments of the world will disappear, but that doesnt mean they ever will. Sorry.

jberman4
jberman4

Mish,

It is my understanding that you regularly advocate for gold as a part of one's portfolio, etc. If someone had followed your advice wrt investing since 2009, how would their portfolio have fared?

Sincerely,

Jeff