The world has been going through a gold fever since the financial crisis of 2008, and many people want to know how much gold is worth. There are no legal requirements for companies to report how much gold they hold, so this can be a tricky question to answer without trading with the company itself. To help answer this question, we’ve come up with a simple equation you can use yourself or have your CPA use. This equation only works for companies reporting the physical gold and nothing else.
Calculating How Much Gold a Company Owns
It is a fundamental equation for how much gold a company owns:
(total assets)/(total liabilities+equity) = how much gold per share. A company worth $100 million with $60 million in liabilities and equity will have 2.50 ounces of gold per share worth of assets. It is based on the assumption that all the liabilities are covered in cash and, therefore, not part of current assets, which contain all the cash and inventory or stocks, as well as receivables, which would be counted as part of current assets under this standard accounting rule. It is not necessarily true in all companies, so there might be small variations in this standard equation.
How to use this equation: To determine how much gold a company holds, divide the assets per share by the number of outstanding shares. For example, the below table shows how much gold the company has based on its assets per share:
Company Assets Per Share Shares Outstanding As Low As X By $15K By $50K Company A 3 3 5,000 13 100m 1oz [2.50oz / 5,000 = .0066 oz] = ~$176m [$100M / 13 = $9.14m] Company B 9 15 495 4 86m 2oz [2.50oz / 495 = .0122 oz] = ~$130m [$86M / 495 = $7.21m] Company C 2 40 656 2 67m 1oz [2.50oz / 656 = .0044 oz] = ~$110m [$67M / 656 = $5.05m] Company D 18 70 3,000 20 150m 1oz [2.50oz / 3,000 = .0060 oz] = ~$300m [$150M / 20 = $6.50m] A company with higher market value will naturally have more gold per share. For example, Company B has a market value of $100M and Company C has a market value of $110M. Thus, the gold held by each company will be different. The answer to this question depends on the size of your portfolio, as shown in the next section.
How Much Gold is Held by Just Governments?
It was one of the most popular questions during the financial crisis of 2008, but apparently, nobody asked how just governments held much gold. There are two ways to look at this. One is just national gold reserves, defined as “all official holdings of the governments of sovereign states, international institutions, and all other groups that are legally bound to respect a state’s right to own gold.” These include the New York Federal Reserve, Homeland Security Department, Central Intelligence Agency (CIA), National Guard Bureau, and Land Management, among others.
The gold held by central banks is the second way to look at it. It includes all Western and Eastern central banks. Both numbers came out to about 3000 tonnes.
How much is this worth? The price per ounce for gold reached $1040/oz in June 2006 and has not fallen below $1000 since then. If the world falls into another financial crisis worse than 2008, this number could go above $1050/oz. The world’s gold would be worth about $4.2 trillion at today’s prices. The critical thing to remember here is that this is not just “government funds,” but all government funds combined worldwide. We are talking about tens of thousands of government institutions, and they do not even agree on what to precisely define as a gold reserve or how much gold to trade with each other.
How Much Gold is Held by Just Americans?
In his latest report, titled: “The Auditors. What are their conflicts of interest, and how do they handle them?”, this question was answered by none other than Warren Buffet himself. Warren Buffet is the Chairman, CEO, and largest shareholder of Berkshire Hathaway. He invests in all sorts of companies that could have a conflict of interest issues.
In his latest quarterly report, he wrote: “the US held a large number of gold reserves at the end of March 2013. As a share of our foreign currency reserves, the total US gold position was about 5%—roughly the same as in early 2000 when we wrote ‘The United States Should Begin to Build Up Its Gold Reserve.'”
How much is this worth? The price per ounce for gold reached $1040/oz in June 2006 and has not fallen below $1000 since then. If the world falls into another financial crisis worse than 2008, this number could go above $1050/oz. At today’s prices, gold reserves in the United States are worth about $350B.