Gold has historically been used in many places as a means of storing or representing wealth. It has been historically hoarded by governments & the wealthy in many countries and places at various times. Currencies have often been devalued by means of lowering their gold or silver content or disconnecting them altogether.
Over the last 200 years, gold has steadily risen in price, more quickly in the last few years, particularly with certain events which have taken place. The US dollar on the other hand, in the same time frame, has lost tremendous amounts of value, as fiat currency usually does – here’s an excellent article explaining the rise and fall (or creation and collapse) cycle of fiat currencies, and the effects on gold and silver.
Let’s first take a look at the last 200 years of gold prices, and it’s significant increases, gathered from onlygold.com…
Gold over the last 200 years:
1792 = $19.39 oz
1892 = $20.67 oz (100 yrs later)
1992 = $333.00 oz (100 yrs later)
2017 = $1,271.90 oz (April 25, Bali time – 25 yrs later)
Significant price change dates and some historical coincidences:
*1862-1869 – saw gold jump from a long and steady $20.67 oz to between $25.11 oz (lowest) and $47.02 oz (highest). A major historical event at this time was the American Civil War, which lasted from between 1861 – 1865. The following years saw more slight fluctuations in the price, but by 1878-79, gold had resumed it’s long standing price of $20.67 oz, which it kept until…
*1933 – gold’s price suddenly jumped to $32.32 oz, and has ever since then been rising at a much faster pace every few years. Significant events on this date included America effectively leaving the gold standard under FDR. WW2 was also in the making, which would last from 1939-1945.
*1971 – the price of gold had steadily risen from $32.32 oz in 1933, to $44.60 oz in 1971. This is the year that the US dollar was completely severed from gold, in that under President Nixon, dollars could no longer be traded in for gold. The following year of 1972 saw another price jump to $63.84 oz, and in 1973 to $106.48 oz. From there, the price explodes.
*Between 1974-1977 gold stayed mostly below $183.77 oz, however in 1978, it reached $208.10 oz.
*Between 1979-2005, gold fluctuated between $272.65 oz (lowest price) in 2000 to $594.90 oz (highest price) in 1980, with the average price being in the 300’s to 400’s range.
*2006-2008 saw the price jump from $635.70 oz to $869.75 oz. It is worth noting that 2007-2008 was the GFC (Global Financial Crises).
*2009 is the year that gold breached $1,000 oz, at $1,087.50 oz. Interestingly, that year the so-called Federal Reserve (which is actually a privately owned group of central bankers which the founding fathers of the US warned against), announced that it would be “injecting” 1 trillion dollars into the US economy, effectively printing more money and inflating the then-current supply, which it has done on multiple occasions. The Federal Reserve is the organization that is currently in charge of printing the USD, which it essentially owns and lends to government. Although the FED has been audited, there have been restrictions on auditing organizations as to how deeply they may probe into the organization.
*From 2010-2017, the price on average has remained over $1,000 an ounce, reaching $1,664.00 oz in 2012.
Gold’s Value Compared To Fiat’s Value:
Now that we’ve seen how the price of gold has risen over the last 200 & 100 years, and how it has spiked over the last few years… let’s take a look at how fiat paper currencies have held up. Of course many other factors may need to be considered here, such as technologies that have made the products cheaper to manufacture, new supplies found or created, minimum wage increases, etc. However, the purpose of this comparison, is simply to show the growth of the value of gold, and the loss of the value of fiat over the selected time periods. Will it always be so, we can’t say, but here’s what we can see for sure:
The following information was gathered from inflationdata.com
Milk / US:
*Fresh milk cost: $0.356 / gallon. At that time, 1 oz of gold (then worth $20.67) would have gotten you 58.06 gallons of milk.
*Fresh milk cost: $3.526 / gallon. That same $20.67 in 1913, in today’s USD fiat, would have gotten you 5.862 gallons of milk in 2013. However, the same 1 oz of gold (worth $1,204.50 in 2013) would have gotten you 341.605 gallons of milk.
Potatoes / US:
*$0.016 / pound. 1 oz of gold would have gotten you 1,291.875 POUNDS of potatoes (that’s a lot of french fries!).
$0.627 / pound. That same $20.67 in 1913, in today’s USD fiat, would have gotten you only 32.9665 pounds of potatoes in 2013. However, the same 1 oz of gold (worth $1,204.50 in 2013) would have gotten you 1,921.05 pounds of potatoes.
Sirloin Steak / US:
*$0.238 / pound. 1 oz of gold would have gotten you 86.848 pounds of sirloin steak.
*$5.705 / pound. That same $20.67 in 1913, in today’s USD fiat, would have gotten you just 3.626 pounds of sirloin steak in 2013. However, the same 1 oz of gold (worth $1,204.50 in 2013) would have gotten you 211.315 pounds of sirloin steak.
Sugar / US:
*$0.058 / pound. 1 oz of gold would have gotten you 356.379 pounds of sugar.
*$0.683 / pound. That same $20.67 in 1913, in today’s USD fiat, would have gotten you just 30.263 pounds of sugar in 2013. However, the same 1 oz of gold (worth $1,204.50 in 2013) would have gotten you 1,763.543 pounds of sugar.
Are you seeing a pattern here? At least for the USD, the cost of several (if not all) food products (and perhaps all other product types) have become drastically more expensive over a period of 100 years. While the same amount of USD fiat currency meant drastically less products can be purchased, the same amount of gold (1 oz) could purchase drastically more of the same products. For more information on the increases in food prices in the US, one may visit the hyperlink above, or visit this site.
Global Average Incomes:
On stats.oecd.org, you can see that the average minimum wage from 2000 – 2016 increased in the majority of 32 countries accounted for.
Many countries remain unaccounted for – and have horrible wages – but for those shown on the graph, it is definitely an improvement for those working.
On the table provided by stats.oecd.org, out of the 32 countries represented, France is shown as having had the highest minimum wage in 2016, at the equivalent of $11.20 / hr. And Mexico had the lowest minimum wage at the equivalent of $0.90 / hr. On a yearly salary, that same year, Luxembourg, Germany had the highest rate at the equivalent of $22,836.10 / yr, while Mexico had the lowest rate at the equivalent of $1,895.70 / yr. Whether you’re on the highest end, the lowest end, or in between them on the income scale, you need to ask yourself: how much is my money depreciating over time with inflation?
It’s a known fact that fiat currencies have a strong tendency to devalue over time (such as we see in the food products / USD examples above), and to have a high volatility rate, due to a variety of economic circumstances (which is the main reason why the Forex market has the highest liquidity out of all the trading markets). And in some circumstances, a fiat currency can reach hyperinflation, such as Germany’s did in 1923 (also known as the Weimar Republic at that time); Or sometimes war and sanctions can crash a currency, as it did to the old Iraq Dinar, after it’s invasion of Kuwait (which affected it’s currency). PS, it is speculated that the Iraq Dinar (IQD), may be reinstated to it’s original value in the future… something to consider.
Given these facts collaboratively, we believe it’s a good idea to invest in precious metals, as a means of helping to store and use wealth today. Gold is (at the moment) and has been a valuable asset to many. That’s why at DinarDirham, we’ve created and are providing a blockchain-based, crypto asset, called the DinarCoin, which is pegged to the worldwide gold spot price. We’ve also made the digital wallet needed to use it. We’re also pleased to announce that a new digital wallet will be accepting our DinarCoin as one of the digital currencies on it’s advanced system.
And that’s it for this week’s article. We hope you enjoyed it and found it informative, and that hopefully it enticed you to consider investing into precious metals, and taking a look at what we have to offer.
Have a wonderful day!
The DinarDirham team
More interesting information here on the price of some foods such as wheat, with minimum wage data: https://ourworldindata.org/food-prices/