Method
The calculation using the gold or silver standard is very simple: the amount you
enter ($X) is divided by the price of an ounce of the material in the year you
choose, and then multiplied by the price of an ounce in the year you want to see
the outcome.
$Xa($/oz)a* ($/oz)b = $Xb
This provides a significantly more reliable comparison frame to understand how the
value of the dollar has changed. What bought one ounce of gold in 1950 buys a lot
less gold today. And a lot less Coca-Cola, and houses, and cars, and…
Notes on method
The value of an ounce for each metal for each year is the halfway point between its
opening and closing yearly prices. From 1968 to present day, the prices are the daily
London fixes published by the LBMA, taking
each year’s first and last price and applying the midpoint method.
Before 1968 there was only one published figure per year: gold only had one
administered price, $20.67 until 1933 and $35.00 from 1934–1968. Before 1968, we
take silver at the unit value (“real and nominal price in USD”) published in
USGS Data Series 140.
The CPI-U comparison, which is the standard method for inflation calculations, comes
from FRED series CPIAUCNS
and begins in 1913.