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Purchasing power: Gold-Mac-Index at historically highest level

News Arnulf Hinkel, Financial Journalist – 09.08.2022

Starting from a 1:1 euro / gold parity in April 2002, the Gold-Mac-Index serves as a purchasing power comparison of gold and euro once a year for a selected month. While the value oscillated around 1 in the first years after the index was introduced, the index value has shifted almost linearly since 2009 in favour of the purchasing power of gold. The latest index calculation from February 2022 shows a value of 4.71, which is higher than ever before.

The basis for the gold-euro purchasing power comparison is the Big Mac Index

Introduced in 1987 by the British "The Economist" correspondent Pamela Woodall, the Big Mac Index has been used for 35 years to compare the purchasing power of different currencies with each other or of a single currency over time. The Big Mac is ideal for such an international comparison because it is sold in nearly 140 countries and is standardised worldwide. This makes it more or less a "homogeneous good", which according to national economics is a precondition for a purchasing power comparison.

Today, one gram of gold buys almost three times as many Big Macs as 20 years ago

The creators of the Gold-Mac-Index, editors of the German information and comparison portal "Gold.de", have not only compared the purchasing power of gold vs. euro since 2002, they have also calculated, based on the regularly published data of the Big Mac Index as well as their own gold price averages for the index month, how many Big Macs one gram of gold could buy in the euro area in the last 20 years,  taking into account, of course, the respective current price, which has risen from 2.67 to 4.42 from 2002 to 2022. Whereas in 2002 one gram of gold equalled 4.11 Big Macs, today it buys 11.67 Big Macs, exactly 2.84 times as many. Conversely, this means that according to this index, the Big Mac purchasing power of gold has almost tripled when adjusted for inflation.

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