One of gold’s qualities is its ability to preserve value. In a world where currencies are constantly losing value, this means that gold can be very effective in protecting your wealth. The difference between saving in dollars and in gold lies in gold’s ability to maintain and increase its purchasing power.
Historically if you saved in dollars over several years, at the end of that period those dollars you saved would buy fewer things than they did before due to the corrosive power of inflation. Regardless of whether prices are rising rapidly or if inflation is supposedly “under control,” the United States Federal Reserve’s policy is to devalue the dollar at a rate of 2% each year as this is its officially stated target inflation rate. This is why it doesn't make sense to be invested in dollars for a long period of time.
Gold and Purchasing Power
A good indicator of how Gold retains its value is the evolution of the price of goods and services over time. To demonstrate this point let us consider how much it costs to buy a a high-end business suit in gold and in US dollars:
In 1900, the average price of a high-end men's business suit was around $35. At that time, the price of gold was set at $20.67 per ounce. That means a high-end suit would have cost around 1.7 ounces of gold.
Currently, the average price of a high-end business suit is around $2,000. At the time of writing this article (January 2024), the price of gold exceeds $2,000 per ounce. This means that the current price of a high-end suit in terms of gold is practically the price of 1 ounce of gold.
It is clear from this example that the price of a high-end suit measured in gold has fallen a little over 58% since 1900. This is what we would expect as a consequence of better technology and productivity. When valued in dollars, the price of a high-end men's suit has increased by 5,614.3% (i.e. 56 times its original price) since 1900.
Seen from another perspective, if in 1900 you had kept $41.34 under your mattress, today, you can buy a casual T-shirt. But if you had bought two 1-ounce gold coins and kept them in a safe place, today, you would be able to buy a high-end business suit and still have $2,000 left to put in your pocket.
We invite you to reflect on how you can preserve the value of your savings over time by backing them up with gold. The way gold has performed over the years was to protect your savings and purchasing power.
Always on the Rise
The price of gold will fluctuate in the short and medium terms. It will drop and increase, but in the long term it has shown to always maintain, or even increase, its purchasing power. Traditional currencies have shown to lose purchasing power year after year. This makes gold an excellent option to securely preserve your savings and mitigate risk in your portfolio.
Protect your savings
Aktagold's mission is to help people around the world protect their money from the economic and financial instability of their home countries. Aktagold gives them access to gold savings in Canada's most secure vaults, an option that was previously reserved only for the wealthiest.
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