Historically, precious metal coins have stood the test of time as the premier store of value. For 400 years, gold has proven to be a stable medium of exchange. This cannot be said for the fiat currencies that have come and gone throughout history. In comparison, fiat currency is a debt instrument used as a form of credit. Gold is real money that carries no counterparty risk. This means that physical gold is free from the risks associated with debt.
Gold vs dollar
From 1880 to 1914, the United States was on the gold standard and an American gold Eagle coin was distributed as US currency. During that time, inflation averaged 0.1 percent per year. Once the Federal Reserve Act passed, inflation averaged 2.7% from 1914 to 1971. Once the US dollar decoupled from the gold Eagle coin, inflation averaged 4% from 1972 to 2019. Since the covid-19 pandemic, real inflation has skyrocketed. A simple way to describe inflation is to have too many dollars chasing too few goods, services, and commodities.
Because of inflation, most US citizens are having to adjust to a lower standard of living. Inflation is another form of taxation. An “inflation tax” is regressive. The definition of regressive is to return to a previous and less advanced state. Precious metals are considered by many as the best way to protect against the regressive effects of inflation. When comparing gold to the dollar, the cost of goods, services and commodities became less expensive in gold and more expensive in the dollar over the past 50 years. This is why it makes sense to invest in gold or silver.
How Gold Protects your purchasing power
Paper currency values can be manipulated by government policy. As a government continues to print paper currency, the paper’s purchasing power weakens, and the costs of goods, services, and commodities rise. Gold is a commodity that must be tangibly produced as opposed to simply printed. The cost to produce gold rises with inflation. Paper currencies lose value due to excessive government deficit spending. As a government goes further in debt, precious metals will offset the loss of purchasing power over time.
How to maximize your purchasing power when acquiring gold
Simply choose the right precious metal dealer.
To help ensure that you receive more metal for your money at purchase, and more money for your metal at liquidation, utilize this simple checklist to help you choose the right precious metal company.
FAQ: Your Key to Understanding!
