Throughout all of history In recent decades gold has been a reliable store of value. It further acts as a robust bartering tool in times of economic instability. Even at its current all-time high, an expensive fine suit would run just over an ounce of gold a century back. Today that price is eerily unchanged. This consistency prompts scrutiny into the broader implications for the economy, particularly regarding inflation and the purchasing power of citizens.
In 1929, our price of gold was roughly $20 per ounce. Meanwhile, the Dow Jones Industrial Average hit a record low of 381.17 points. At that time, it took an average person about 19 ounces of gold to buy all of the companies in the Dow. As of today, gold’s price is over $3,800/oz. By contrast, the Dow has soared to slightly more than 46,300 points. This change means that investors today require only 12 ounces worth of gold to buy the Dow. This marks a drastic shift in market conditions compared to the last 100 years.
The Current Landscape of Gold Pricing
Coin gold premiums have recently reached record low levels. Prices have plummeted to a mere 49 cents per troy ounce! This negative trend for premiums on one hand leads to curiosity about the supply/demand in precious metals markets. Just look at the 1964 quarter. Today, it has a melt value of more than $8—that’s more than 100 times its original face value.
9, financial commentator Mike Maharrey lays out gold’s case as the ultimate resilient barter tool and wealth-preservation vehicle. When the economy is in turmoil, gold is one of the best assets to invest in. It stands firm even in the face of market downturns and economic collapse. Despite the volatility of crypto and macroeconomic conditions, its intrinsic value usually holds firm—or truly shines—when fiat currencies crisis.
In 2018, with markets starting to wobble, the Federal Reserve went dovish by cutting interest rates. Seen together with several other key pre-pandemic decisions, this was an important turning point. The Fed’s monetary response after the 2008 financial crash was extreme by reducing interest rates to zero and rolling out wave after wave of quantitative easing (QE) programs. Thus, nearly $5 trillion was pumped into the economy just during the pandemic period.
Economic Spending and Debt
The federal government’s spending habits have been criticized in recent years, too. Year-to-date FY 2024, federal spending has totalled $6.73 trillion, up 5.9% from prior year spending. This dramatic increase in spending only fuels the fire of the current $37 trillion national debt. This figure is important as one of the more prominent indicators. What it really proves is that spending priorities have not changed, despite seismic economic shifts.
The interest expenses related to this debt gobble up almost $1 trillion per year. These type of fiscal commitments are troubling not just for their fiscal unsustainability, but because of their possible negative effects on citizens’ purchasing power in the long term. The Federal Reserve’s target inflation rate is 2 percent. While this may seem unassuming, it will end up costing you about 10% of your purchasing power over five years.
This plight is a further example of how inflation continues to be the stealth villain hurting main street Americans. As spending continues unabated while debt accumulates, the question arises: how will citizens adapt to changing economic landscapes? Gold may offer a solution for some as people seek ways to mitigate the impacts of inflation on their wealth.
Gold as a Hedge Against Inflation
As we’ve learned from history, gold has not only been a proven inflation hedge, but has maintained its purchasing power through the decades. The current state of our economy can be found in the alarming levels of debt and unsustainable government spending. With inflation likely to continue, investors may turn to gold as a safer asset more than ever.
Maharrey’s perspectives remind us that in uncertain times, people flock to gold. They don’t just use it to store their wealth—they use it to conduct trade with one another. Financial markets can be volatile in extreme ways. Yet, gold provides a historical reliability that provides peace of mind for those who eye currency depreciation with skepticism.
As interest rates remain low and government spending escalates, the relevance of gold as an asset class is expected to maintain or even increase its significance. What the lessons of history tell us is that when economic disaster strikes, gold always proves to be a reliable refuge.