As the prices of gold reaches all time highs (see chart below), I wanted to share this pretty simple image that explains it all. As the whole world complains about inflation, its nice to remembers there are some assets that are true hedges against currency devaluation.
So, should you invest in some gold? Probably. Here's some history...
Over the last 50 years, the perception and role of gold as an investment have evolved significantly. Traditionally, gold has been a favored asset for its dual ability to act as both a hedge against inflation and a "safe haven" during periods of economic uncertainty. In the 1970s, as inflation spiked due to various global economic crises, gold prices skyrocketed, peaking dramatically in 1980. This era solidified gold's reputation as a protective asset against inflationary pressures. However, the following decades saw periods of both boom and bust for gold as global economic conditions changed, with prices dipping in the late 90s and early 2000s, then surging again during the financial crisis of 2008. The advent of gold-based financial products, such as ETFs, has also made gold investment more accessible and attractive, integrating it more deeply into the global financial system.
Addressing the comparison between home prices and gold, it's a fascinating illustration of gold’s purchasing power stability. Roughly 50 years ago, the average price of a home in the U.S. could have been around $25,000, which at the time would equate to about 10 bars of gold, given that an ounce of gold was approximately $35 and each bar could be around 400 ounces. Fast forward to today, although the price of homes and gold in dollar terms has increased, the relative value in terms of gold bars has intriguingly remained comparable; this outlines gold's strength in maintaining its purchasing power over long periods. This characteristic is why gold is considered a hedge against currency devaluation. As currencies lose value due to inflation or other economic factors, gold prices often increase, which helps preserve the wealth of those who hold gold in their portfolios. Thus, investing in gold can be a strategic move to protect against fiscal erosion in the face of unstable economic climates.
Now... if you don't want to invest in gold, you can flock to BTC as many investors call it the "digital gold", however just remember that both gold and bitcoin are currently selling at or near ATHs.
