When my father was a young man, his father told him to buy gold if he hoped to ever retire to a life of leisure in his old age. He told him that for as long as people have been civilized, the same amount of gold would buy a very good suit, and that a man would always need a good suit if he wanted to be seen as successful.
My grandfather was right; if you look at the history books, you’ll see that one single ounce of gold, if redeemed, would almost always cover the cost of a very nice suite. It’s true today, and it has been true over the past several hundred years. In short, gold has kept up with inflation.
While it’s true that there have been times in that gold has spiked wildly in value, it’s also true that it has rarely if ever fallen below the cost that was paid for it. Gold is a unique substance in that people find it intrinsically valuable, even if they personally have no real actual use for it. It’s pretty, and shiny and pretty heavy, and most cultures use it to make jewelry and other fancy things to show off how well they are doing, but it’s always been more than that. Because of its rareness, and its unique properties, gold has always held a certain fascination for those that seek to own some bit of it. And because of its ability to hold its worth, gold has always been associated with riches and treasure. And it’s because of this belief that gold has managed to keep up with, and quite often has surpassed the rate of inflation, and thus managed to keep its value.
Even as gold has become relatively more abundant as new methods of finding and extracting are developed, it still retains its value, which seems to go against most economic models of supply and demand. But the reason is simple; we’ve found newer uses for it. Gold is now used in virtually all electronic equipment and in many other modern applications as well, thus, it is even more in demand than it ever was before because there are so many more people with money to buy these things.
Consider the value of stocks over just the past century; while at times their value has skyrocketed, other times they’ve plunged taking entire economies with it, gold has maintained its value throughout, and there is ample evidence to indicate that it will continue to do so.
If you buy an ounce of gold today, you can be reasonably assured that whenever you retire, you’ll be able to cash it in and buy yourself a very nice suit. The same cannot be said of any other investment.