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Written by The Informed Aussie
Published on Wednesday, August 15th, 2012
Over the last 100 years, inflation has eroded the value of almost all goods and services. In fact, in 1963 the value of $100.00 USD was around $14 in 2010. This equates to an 86% decrease in the value of the USD.
On the other hand, the price of gold since 1951 has risen from $34.72 USD to $1,601.10 USD per ounce.
The best way to protect your wealth is to include Gold as part of your investment portfolio.
It’s a well-known fact that gold has defied the trends of fiat currency and has held its value much better than fiat currency. From the graph below, you can see a near-perfect inverse relationship between the amount of money in circulation and its purchasing power.
Therefore, what could one ounce of gold in 2012 buy in 1963? For this exercise, I will be using the current price of Gold ($1,601.10 15 August 2012)
To begin, let’s examine how many cars one ounce of gold could buy?
The price of a new car in 2012 can vary from $10,000 to over one million dollars. However, one ounce of gold in 2012 could have bought the following cars.
In 2012, the average price of a car in America is around $30,000. This equates to just over 18 ounces of gold.
To prove even further how much gold has held its purchasing power and why it should form part of your investment strategy, let’s examine the purchasing power of gold from the early 60’s.
As can be observed above, even with such high inflation, the purchasing power of gold has grown significantly.
Many argue that the introduction of a cashless society is the building block for the formation of world government. Although I don’t personally agree with this theory, one must wonder how easy the money supply could be disrupted or even worse shut down, by governments or criminal enterprises if we lived in a cashless society.
With over 9.5 million mobile money transactions in two years (increased usage of electronic trading), high inflation and the breakdown of our financial system, the necessity of having gold as part of an investment portfolio is more crucial than ever.