Gold: Ultimate Preserver of Wealth and Ultimate Investment

Gold is money. Every other monetary instrument is just currency.

The economically accepted definition of “money” has several requirements. However, the central and intrinsic property is that real money must be “a store of value”.

Here gold distinguishes itself from all other so-called money (except silver) in two ways: its longevity of acceptance as money and its unequalled track record of wealth preservation.

Wealth preservation across millennia

Priced in gold, the ‘mighty’ U.S. dollar has lost over 98% of its purchasing power since the United States eradicated the last vestige of the gold standard in 1971.

Not a store of value. Not money.

The bankers call all that lost wealth “inflation”. True students of economics call that currency dilution.

Then there is gold.

In ancient Rome, with a one-ounce gold coin, a gentleman could purchase the finest attire of that era: a hand-made toga of the finest cloth, along with accessories – a leather belt and sandals.

In the Renaissance era, with a one-ounce gold coin, a gentleman could purchase the finest attire of that era: a custom-tailored suit and accessories.

Today, with a one-ounce gold coin, a gentleman can purchase a fine suit and accessories. But because the price of gold has been heavily suppressed in recent decades, (temporarily) you have to buy “off the rack”.

That is a store of value. That is real money.

Perfectly preserving the wealth of the holder. Gold has performed in this manner because it also perfectly satisfies the other criteria of real money.

It is a “rare or precious” material. It is uniform (each gold coin is identical to another of equal weight). And it is easily divisible. Gold can be denominated in as large or as small a unit as required.

Perfect wealth preservation in the modern era

Some skeptics may not be convinced about gold’s wealth preservation superiority by the anecdotal nature of the data above.

How about this? Gold versus real estate.

But not just any real estate. Some of the most highly-prized real estate on the planet: residential real estate in Manhattan (New York).

Priced in U.S. dollars, residential real estate prices in Manhattan have increased by over 10,000% across roughly 100 years.

Priced in gold, residential real estate prices in Manhattan have only increased by ~25% over 100 years.

Ten thousand percent versus twenty-five percent. Currency versus money.

Earn a “dollar” through your labors. Convert that dollar to gold, immediately. Your hard-earned dollar is then perfectly preserved rather than devoured by the (central bank) “inflation” that destroys all fiat currencies.

That wealth is not just preserved across your own lifetime or the lifetime of your children. It will be perfectly preserved even in the hands of your distant descendants.

Ultimate money and ultimate preservation of wealth.

Gold is also the ultimate investment asset

The data above tells us about a lot more than just gold’s unparalleled wealth preservation properties. It also provides a clear window on how rapidly the value of paper ‘money’ (our fiat currencies) is being destroyed by central bank inflation.

Equally, it also shows us how illusory is “asset appreciation” (and the so-called “capital gains” that governments tax).

Suppose that 100 years ago, some investing stalwart put their life’s savings into residential real estate in Manhattan – instead of gold. Even spread across 100 years, a 10,000% return is pretty good, right?

Wrong. Versus gold that real estate has only appreciated by 25% over 100 years, or 0.25% per year. That would be your actual gross “return” on that investment.

Then subtract 100 years of maintenance expenses and property taxes on that real estate. Not only does all the profit (versus gold) evaporate, the real estate holder is eating a significant loss – on his Manhattan residential real estate.

Own some of the most-coveted real estate on the planet. Yet make no real profit, even spread across 100 years.

What investment bankers and intellectually bankrupt financial advisors call “profits” is nothing more than asset price inflation, the speed with which the Mighty Dollar has shed its purchasing power.

Let’s call this the “ultimate principle of investing”.

A hundred years later, a piece of land is still just a piece of land. Any real increase in value can only come from improving the land, i.e., erecting and/or improving structures, or increasing the utility of the land.

Investing in real estate doesn’t generate actual profits. Rather, it’s simply one of the more reliable vehicles of wealth preservation.

Getting rich in real estate can only come through the high-risk endeavor of trading in real estate, “flipping” real estate for short-term profits that exceed the trader’s losses from the rapidly depreciating currency in which the real estate is priced.

Now let’s look at gold as an investment.

Since the “gold window” was closed by the Nixon administration in 1971 and the price of gold was (supposedly) able to float freely, the price of gold has increased from $35 per ounce to ~$2,000 per ounce (in U.S. dollars).

That’s roughly a 5,700% return on investment, or 10.14% per year (uncompounded). That ROI makes gold the best-performing investment asset over the past 50 years.

This should surprise no one. Investment “profits” are, as we have discovered, nothing more than the degree that a particular asset preserves wealth.

Gold preserves wealth better than any other asset on the planet, Ergo, gold also has the best investment profile.

Gold versus cryptocurrencies

At the peak of Bitcoin Mania in 2021, when the price of Bitcoin surged to nearly $70,000, many crypto-fanatics had the audacity to assert that Bitcoin was at least as good a store of value (wealth-preservation vehicle) as gold.

Then Bitcoin promptly shed more than 75% of its value, and that self-delusion has now met a well-deserved death.

The flawed argument that Bitcoin can be a store of value is founded entirely upon one premise: that the Bitcoin algorithm creates artificial scarcity of supply, and thus Bitcoin is supposedly “rare or precious” (like gold).

There are two fatal flaws in this simplistic argument.

First, while the supply of Bitcoin is limited (in the most-strict definition of that term), as soon as Bitcoin was “securitized”, the quantity of Bitcoin-based investments has been increasing exponentially. Translation: infinite supply.

Secondly, while the number of Bitcoins are limited, Bitcoin has long since ceased to be the only game in town when it comes to cryptocurrencies.

Numerous (countless?) additional cryptocurrencies have been conjured into existence. Each one of them traces its dubious ‘value’ to nothing more than a computer algorithm.

There is no limit to the number of cryptocurrencies that can be created. Translation: infinite supply.

Then we have the supply of gold.

Constant supply = constant value

Gold is a precious metal in every sense of the word, due to both its scarcity and aesthetic properties. Remarkably, however, the increase in the total supply of gold has roughly paralleled the growth of the human population.

Our best estimate is that humanity has mined approximately 208,874 tonnes of gold, spread across ~5,000 years. Approximately two-thirds of this gold has been mined since 1950.

Today, the global population is a little over 8 billion people. Slightly more than two-thirds of population growth has occurred since 1950.

Gold’s relative scarcity has remained almost constant, over decades and across centuries. Gold is as “precious” today (per capita) as it was 10 years ago, or 100 years ago, or 1,000 years ago.

Translation: the relative supply of gold on the planet (per capita) remains constant.

How close is this parallel between gold supply growth and population growth?

Over the past 50 years, the rate of growth in the global population has been slowly-but-steadily shrinking. The rate of growth in the global gold supply is also shrinking.

In fact, even in absolute terms, the supply of gold is now projected to start shrinking.

Global gold supply to fall after 2022

Gold is “precious” due to its aesthetic qualities. And gold is “rare” due to its constant relative scarcity.

Eternally precious and eternally rare.

Today, many people are seeking to ‘reinvent the wheel’, both in terms of investing options and our currencies (money).

Stocks, bonds, real estates, and a near-infinite list of “financial products” compete with gold as investment candidates.

More “investing” options come into existence every day. These alternative asset classes may outperform gold on a short-term (or even medium-term) basis – generally via adding leverage and risk.

None of these other investment classes can compete with gold over the long term because none of these other paper instruments or even hard assets can compete with gold’s wealth preservation properties over the long term.

As the fiat U.S. dollar nears its final death, the plunge-to-zero that has occurred with every fiat currency ever created (over 1,000 thousand years), clueless economists and bureaucrats are now scrambling to come up with the next “global currency”.

The same central banks who have destroyed the value of all our current fiat currencies are now proposing the creation of their own “digital currencies”.

This transparent power-grab will do little to slow the death-spiral of these fiat currencies, whether in paper or digital form. However, it will infinitely increase the control of the bankers over our wealth.

Solution: transfer even more of your wealth out of the fiat currency System and into the eternal security of gold.

We don’t need new investments. We just need gold.

We don’t need new ‘money’. We just need gold.

When economic fraudsters insist that “a gold standard is impractical”, what they are really saying is that an Honest Money monetary system is incompatible with the large-and-numerous financial frauds that the bankers have incorporated into our present system, such as “fractional-reserve banking”.

“Buy” gold as the best investment. Hold gold as the best means of wealth preservation.

Call it what you want. Either way, it translates into the ultimate form of financial security.

Authored by Jeff Nielson for Neptune Global

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