Contact us
CALL US NOW 1-888-GOLD-160
(1-888-465-3160)

Does Gold Really Preserve Purchasing Power? The Case of the High-End Suit

  by    0   4

One of the characteristics of gold is that it preserves wealth in a world of constantly devaluing fiat currency.

Put another way, it preserves your purchasing power over time.

If you hold onto dollars for several years, they will buy less stuff at the end of that time period than they did at the beginning. This is especially true when we have rapidly rising prices as we do today. But even when inflation is “under control,” Federal Reserve policy is to devalue the dollar by 2% every year.

It simply doesn’t make sense to hold onto dollars for any length of time.

We can demonstrate this in a tangible way by pricing a good or service in gold and examining the change in price over time.

As an example, let’s consider a high-end men’s suit.

In 1900, the average price of a high-end men’s suit was around $35. At the time, the price of gold was set at $20.67 per ounce. That means a high-end suit priced in gold would have cost around 1.7 ounces of gold.

Today, the average price of a high-end suit is around $2,000. Obviously, prices vary depending on the brand, region and other factors, but this provides a fair average. At the time I’m writing this, the price of gold is around $1,840 an ounce. I’ll use $1,800 for this calculation to keep it simple. That means a high-end suit priced in gold today costs a little over 1.1 ounces of gold.

As you can see, the price of a suit in gold has dropped a little over 35% since 1900. This is what you would expect given advances in technology and productivity. But priced in dollars, the price of a high-end men’s suit has increased by 5,614.3%.

Looking at it another way, if you had stuffed $41.34 under your mattress in 1900, today you might be able to buy a couple of Polo shirts if you find a deal. But if you had bought two 1-ounce gold coins and stuffed those under your mattress in 1900, today you’d be able to buy a fancy suit and have about $1,600 left over.

Of course, the price of gold fluctuates day to day, month to month, and year to year. In some years, the price of gold even falls. But over time, it has historically maintained its purchasing power even as fiat currencies lose buying power year after year.

Added to the fact that it carries no counterparty risk, gold is an excellent way to safely preserve wealth and mitigate risk in your portfolio.

Download SchiffGold's Gold vs GLD EFT's Free Guide

Get Peter Schiff’s key gold headlines in your inbox every week – click here – for a free subscription to his exclusive weekly email updates.
Interested in learning how to buy gold and buy silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!

Related Posts

ESG Collapsing? The Latest on Corporate “Environmental, Social, Governance”

ESG, or “Environment, Social, and Governance,” is the new feel-good buzzword in the halls of global corporations and megabanks. It’s a PR push to cloak morally disastrous firms in a veneer of social and environmental responsibility — lip service — but at the end of the day, I believe the market will speak. 

READ MORE →

Recent Concerns Voiced by Legendary Investors

At SchiffGold, while there are areas of disagreement with Warren Buffett’s right-hand man, the late Charlie Munger, his nuggets of wisdom, often referred to as ‘Mungerisms,’ hold considerable weight in the financial world. Covering topics from wealth and happiness to avoiding foolish mistakes, Munger’s insights are diverse.

READ MORE →

What Gold Mining Companies Are Telling Their Investors

The most direct way to invest in gold is to buy gold and as SchiffGold advises the smart way to buy gold is to buy gold coins or billions. Sometimes investors bullish on the long-term prospects of gold take a look at the stocks of gold mining companies. Stocks of course lack some of the most attractive features […]

READ MORE →

Biden Blames Retailers for Inflation Created by his Policies

On Super Bowl Sunday, President Biden took to X (formerly Twitter) to skewer consumer brands for “shrinkflation,” a phenomenon where product vendors reduce package sizes without proportionally reducing price, in what essentially amounts to a per unit cost increase for consumers. The video explicitly calls out popular snack brands such as Breyers, Gatorade, and Tostitos— all food […]

READ MORE →

Currency Chaos: A Look at the Lira, Argentine Peso, and Ruble

It’s already looking like it could be a dramatic year for the US dollar, and a good time to check in on a few of the major troubled currencies around the world: the Turkish Lira, Argentine Peso, and Russian Ruble. 

READ MORE →

About The Author

Michael Maharrey is the managing editor of the SchiffGold blog, and the host of the Friday Gold Wrap Podcast and It's Your Dime interview series.
View all posts by

Comments are closed.

Call Now