Why Gold?

 

Gold is universally recognized as an asset of value.

 

Read here about:

 

Gold metal as a stable means of payment

Gold retains its purchasing power over decades

Gold wins against paper money

 

 

 

 

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Gold is money – everything else is fiat

Gold is an almost ideal money. Read a brief overview of the medium of money from its beginnings to Bitcoin, and what your government is planning for the future of your money.

 

 

 

 

 

Gold metal as a stable means of payment

 

The periodic table contains 118 elements. Only five of them are precious metals. That means they are stable, they do not oxidize, they are fusible and they are not radioactive. These five precious metals are gold (Au), silver (Ar), rhodium (Rh), palladium (Pd), platinum (Pt).

 

This explains the important role of gold and silver since ancient times as an effective store of value. After all, rhodium and palladium were not discovered until the 18th century. Platinum has too high a melting point to be of any practical use.

 

The five stable elements in the periodic table.
Source: https://www.youtube.com/watch?v=rXrA58CSGbk

 

 

 

Gold retains its purchasing power over decades

 

To date, about 210'000 tons of gold have been mined. About 3'700 tons of gold are produced per year (this figure includes recycled scrap gold). This corresponds to a value of about 228 billion dollars per year or not even 1 billion per day.

 

Meanwhile, the annual growth of the money supply (before the pandemic), and thus the depreciation of money, was between 6-9%. Since the abolition of the gold backing of the US dollar in 1971, almost all unbacked currencies have lost more than 90% of their purchasing power. The US dollar has lost as much as 97% of its value against gold. The purchasing power of the euro has fallen by 77% in the 20 years since its introduction in 1999. After all, the Swiss franc has depreciated by only 70% against gold.

 

 

Performance of fiat currencies and commodities versus gold.
Source: https://www.goldavenue.com/de/blog/newsletter-edelmetall-spotlight/gold-gegen-papiergeld

 

 

 

Gold wins against paper money

 

Since the abolition of the gold backing, states have been able to print money unhindered, i.e. create money out of nothing by decree – so-called fiat money (from the Latin "fiat" for "it becometh").

 

Wars and crises are managed by printing money*. Over 20% of all US dollars ever created were "printed" in 2020. The money supply in the US, Japan, the Eurozone and Switzerland has never been as high as it is today. At the same time, the national debts of many countries have also risen to new highs.

 

Today, the newly created money is matched by only a fraction of real goods and values. This leads to "asset inflation" – that is, real estate, stocks, commodities, etc. become more expensive because they are now scarcer compared to fiat money.

 

In the medium term, an increase in the money supply leads to a noticeable devaluation of money relative to everyday goods – i.e. to classic inflation – with which the overvalued money readjusts to the value of the goods.

 

Gold is and remains scarce and therefore retains its purchasing power. Although the gold price can be volatile at times, this evens out over longer periods.

 

And gold has no counterparty risk. There is no need for a sovereign collective that people must trust in order for gold to have value. This is quite unlike fiat money, with no intrinsic value of its own.

 

 

Central bank balance sheet growth
Source: https://www.yardeni.com/

 

 

 

* For pre-modern experiments in money printing, the book "The Ascent of Money" by the renowned economic historian Niall Ferguson (2009) can be recommended. Available on Amazon.