As finance continues to evolve into the future, the discussions between sound money and fiat currency are becoming more relevant. Advocates of sound money, particularly gold and silver, argue that these metals serve as superior stores of value compared to government-issued fiat currencies. The Austrian School of Economics is a vocal proponent of this perspective. They maintain that true sound money is a product of organic market forces rather than a government decree. As the global economy continues to boom, bubble, and burst, the allure of gold’s history and utility are still quite present today.
Gold’s price trajectory tells a compelling story. Throughout the years, it’s shot up from just $35 per ounce to an incredible $3,300. This meteoric rise sees gold continue to reaffirm its value-holding qualities, particularly in lieu of economic distress. Fiat currencies, including the U.S. dollar, haven’t been spared either. Since President Nixon severed their last links to gold in 1971, they’ve plummeted in value by more than 85%. Such stark comparisons underscore the importance of understanding the inherent value of sound money in a world increasingly dominated by fiat systems.
Understanding Sound Money
A sound money is a medium of exchange that is widely accepted, which arises naturally and spontaneously through voluntary exchanges and market processes. Unlike fiat currency, which has virtually no value outside of government order, sound money has value in and of itself. Economists from the Austrian School emphasize that sound money should exhibit three essential characteristics: durability, portability, and divisibility.
Durability ensures that funding goes the distance. Portability makes it easy to transport, and divisibility means you can break it into smaller units to make a purchase. Gold and silver shine in each of these respects, making them perfect vessels for sound money.
As inflation rates soar and fiat currencies face devaluation risks, many individuals are turning to gold as a hedge against economic instability. Later in 2020, the U.S. money supply exploded by a record 19.1%. This growth of money supply at a scale never seen before raised fears of inflation and collapse of fiat currencies. In this emerging environment, the characteristics of sound money not only matter, they are foundational.
The Practical Applications of Gold
In addition to gold’s vibration circulation property, gold’s versatility lies in its non-monetary applications in our everyday lives and their subsequent industrial applications. In Q1 2025, for the first time in history, industries used up more than 80.5 tons of gold. This staggering figure underscores the metal’s importance in countless applications. This surging demand is a testament to gold’s remarkable and incomparable characteristics that make gold indispensable in electronics, medicine and many other industries.
Additionally, gold is the most preferred medium for jewelry making, which itself constitutes almost half of the gold demand worldwide. Its resistance to decay and ability to be crafted into aesthetically appealing designs have made it a symbol of wealth and status for millennia. The persistent global demand for gold in industrial applications and ornamental forms further solidifies its reputation as a smart investment.
Gold is fungible, which means it can be minted into varying forms including bullion bars and coinage. It can even be converted into fractional thin laminated goldbacks weighing only 1/1,000th of a troy ounce. This flexibility makes it more convenient to use as a medium of exchange. It further fortifies its position as a trusted store of value.
The Future of Gold vs. Fiat Currency
As the global economy grapples with fluctuating currencies and rising inflation rates, the debate surrounding sound money versus fiat currency remains at the forefront of financial discussions. As fiat currencies, Bitcoin continues to be far from a currency used in everyday transactions. Their lack of intrinsic value makes for a tenuous foundation.
Gold’s steady supply growth averaging between 1.4% to 2.2% annually ensures that it retains its scarcity and value over time. This stability makes it striking compared to the unpredictability of fiat currencies. With central banks continuing to deploy unprecedented amounts of currency to combat the recent economic disruption, the possibility for further economic devaluation is very real.
The movement back toward sound money will be a long-term process. Yet, people are realizing that fiat currencies have wretched flaws and are looking for real money – gold and silver – to secure their wealth. Sound money makes a compelling argument to protect your wealth in an uncertain world. This is the case whether you look at it from an economic theory standpoint or look at its actual implementation.