W9_AEP_Reanalysis the Gold savings for cow


200910YearofOxGold

Problem identification

Previously discussed in my W8.1 blog that saving in gold to buy a cow to be sacrificed on Eid al-Adha is preferred as it is the only stable currency. Using the 2000-2013 data price per kg in Rupiah (IDR) and Dollar (USD) which were converted to gold unit per kg for analysis, the 3 trendlines set shows the big spread with R-squared below 0.90. Dr. Paul commented that I need to do experiment to get the curves of scenarios closer together and find the way for the R-squared to be above 0.90. The fluctuation of cow price over the years influences the trendline curves. While the historical values come from the average price of its year, the 2013 value comes from the spot price in Eid al-Adha.

Development of alternatives

In order to have the curves closer is by using a set of closer data to the current price. The 2013 data is dropped and will have it plotted in the calculation. The 2006-2012 data is then analyzed.

Development of prospective outcomes

The 2006-2012 data price of cow in gold unit per kg in IDR and USD compared to the 2000-2013 data are plotted and shown in Picture 1 and 2 as below.

cow-idr-2006

Picture 1. Gold gram per kg of cow in Rupiah

cow-usd-2006

Picture 2. Gold gram per kg of cow in US Dollar

Selection of the acceptable criteria.

Either purchasing gold in Rupiah or US Dollar which is gives the most purchasing power of cow saving for Eid al-Adha.

Analysis and comparison of alternatives.

Develop three projection curves for each correlation assumed as best case, worst case and most likely using Delphi Technique. Since the variance is narrower and the R-squareds are above 0.90, we can use P90 level for analysis. The P95 level and 3-sigma are also calculated for comparison. The 2013 value is calculated using the trendlines equations.

Picture 3. Representative Gold gram per kg of cow in Rupiah

Picture 3. Representative Gold gram per kg of cow in Rupiah

Representative Gold gram per kg of cow in US Dollar

Picture 4. Representative Gold gram per kg of cow in US Dollar

Using the value of P90 in Picture 3 and Picture 4, if we want to buy a 400 kg of cow in year 2014 will be worth of 40.14 grams of gold-Rupiah, and 36.25 grams of gold-Dollar. While using 2000-2013 data presented in W8.1 blog resulting that in year 2014 will be worth of 37,02 grams of gold-Rupiah, and 37,50 grams of gold-Dollar. The delta of these values showing that the data selection and the fluctuative data, will influence the result of calculation.

The result of current analysis shows the opposite result from the W8.1 analysis. It is shown that we will need less grams of gold to purchase the cow in USD than in IDR. This also indicate that the purchasing power of IDR is less than USD.

Selection of the preferred alternative

Saving in gold for cow for the next Eid al-Adha is preferred as it is the only stable currency. Since the method of analysis is changed into narrower, exchanging in USD is preferred to provide enough gold as it has the most purchasing power than in IDR.

Performance monitoring and postevaluation of results

It is the fact that Rupiah and US Dollar have lost its purchasing power up to 200% in just 30 years. Saving in USD for short term have the same purchasing power as saving in Rupiah. But saving in gold is still recommended to exchange for our needs in Rupiah than in US Dollar as long as the price of our needs ar primarily in Rupiah. However, the condition of world’s politics and the market supply and demand for gold also for cows, can also affect its sale price in various currencies.

References

ANALISIS HARGA DAGING SAPI (PART 2) ~ Daging Sapi. (2012, November). Retrieved from http://analisisdagingsapi.blogspot.com/2012/11/analisis-harga-daging-sapi-part-2.html

Historical exchange rates from 1953 with graph and charts – fxtop.com. (n.d.). Retrieved from http://goo.gl/v6aDFE

Kementerian Perdagangan (2011). Tinjauan Pasar Daging Sapi (04/SAP/TKSPP/2011). Retrieved from http://ews.kemendag.go.id/ews2/Sangkuriang/Publikasi/dokumen/sapi2011050101.pdf

Kementerian Pertanian (2012). Statistik Harga Komoditas Pertanian Tahun 2012. Retrieved from Pusdatin Pertanian website: http://pusdatin.deptan.go.id/admin/satlak/Statistik_Harga_2012.pdf

London Fix Historical gold – result. (n.d.). Retrieved from http://www.kitco.com/scripts/hist_charts/yearly_graphs.plx

Permana, A. (2013, October 1). W11.2_APE_Presidential Cost in Indonesia | Simatupang AACE 2014. Retrieved from https://simatupangaace2014.wordpress.com/2013/10/01/w11-2_ape_presidential-cost-in-indonesia/

Prasetya, A.E. (2013, October 24). W8.1_AEP_Cow saving for Eid al-Adha | Simatupang AACE 2014. Retrieved from https://simatupangaace2014.wordpress.com/2013/10/24/w8-1_aep_cow-saving-for-eid-al-adha/#comments

Setiawan, N. (2006, March). Perkembangan Harga Daging dan Telur Ayam 1980 – 2004.Majalah Poultry Indonesia1(2006).

Sullivan, W. G., Wicks, E. M., & Koelling, C. P. (2012). Chapter 8 / Price Changes And Exchange Rates. In Engineering economy (15th ed., pp. 344-369). Boston: Prentice Hall.

The World Bank (2013, March). PERKEMBANGAN TRIWULANAN PEREKONOMIAN INDONESIA. Retrieved from http://www.worldbank.org/content/dam/Worldbank/document/EAP/Indonesia/IEQ-MARCH-2013-BHS.pdf

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2 Comments

Filed under Afriandi EP, Week 09

2 responses to “W9_AEP_Reanalysis the Gold savings for cow

  1. AWESOME Pak Afriandi!!!! NOW you seem to have mastered the use of gold equivalence as the basis for projecting the costs into the future……

    Excellent case study and you really did a nice job on this updated analysis!!!

    NOW, I would really like to see you do one for a real oil and gas project, just to make sure you have mastered this tool and technique!!!

    Take an OLD project from say 4 or 5 years ago and pretend that you are going to build this exact same plant or platform in Malaysia or Libya or China in 2020……..

    Keep up the good work and looking forward to seeing more on your paper!!!

    BR,
    Dr. PDG, Jakarta

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