Inflation Then and Now: How Gold Has Stayed On Top

As many have observed, inflation is dramatically on the rise. Learn about the history of gold as a hedge against inflation below....
Inflation Then and Now: How Gold Has Stayed On Top
Written by Brian Wallace
  • While nearly everyone is aware that inflation is not a new trend in the United States, it may still be surprising how much prices have changed over the past few decades. Did you know that $.06 in 1922 has the same buying power as $1 today?  While prices are soaring, it is clear the value of the dollar is declining, and yet gold has still remained one of the most valuable investments. 

    Price Increases Through the Years

    Over the last 100 years, prices for some of the most basic items have increased by hundreds or even thousands of percent. For example, in the last century the price of milk has increased from $.69 to over $6, an 825% increase. The 1960’s saw the first year where a gallon of milk cost more than a dollar, but now milk for a dollar is unheard of. An even higher increase can be seen in the price of a new car which rose 23,815% from $260 to over $60,000. 

    With all of these increases, the value of money is declining. As of today it is estimated that $1 will only amount to about $.65 in ten years due to runaway inflation rates. The 1980’s saw inflation hit an all time high of 14.5%. The value of the dollar diminished significantly into the 2000’s, and once the pandemic hit in 2020 it decreased even more due to the unconventional recession. In 2021 the US dollar depreciated 16% compared to the Australian dollar, 12% compared to the Canadian dollar, and 9% compared to the British pound. Even with the patterns of inflation and money decreasing in value, gold has remained one of the safest investments. 

    Why Gold Holds Its Own

    Gold is one of the few investments with 0% counterparty risk which makes it safer than other options. It also has a higher investment return rate of nearly 25% compared to the 18% return rate of the stock market.  Gold also has a set amount of 244,000 metric tons on the Earth. Paper money only loses its value further when it is overprinted which cannot happen with gold. Gold has also been where many investors turn to in times of past recessions.

    In the 2008-2012 recession, gold saw a 101% surge in interest. Investors saw the decrease of the value of currency and poured more money into gold which caused its value to increase.  Since investors found so much success in the past, there has been a stronger public demand in times of economic strife. In fact, 1 in 6 Americans bought gold in 2020 and overall demand jumped 80%

    In Conclusion

    Today, inflation continues to rise. In 2022, inflation rose 9.1% and it is not expected to slow down any time soon especially given the Russia / Ukraine conflict. The value of the dollar is continuing to decline, and if history continues to repeat itself we will see investors turning to gold once again. This should lead to yet another surge in interest and value and keep gold on top of all other investments To learn more about how gold holds its value in times of inflation, take a look at the infographic below:

    In An Era Of Inflation, Gold Still Reigns Supreme
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