Long-term purchasing power: gold tops any currency
News Arnulf Hinkel, financial journalist – 28.05.2020
The price of an ounce of gold on the world markets is usually quoted in US dollars, while in Europe, it is often specified in euros per gram. So what would happen if the tables were turned and the value of currencies were calculated in gold? One year ago, on the 20th anniversary of the euro, the investment company Aureum AG examined the performance of gold against the euro in its “In Gold we trust” report and found that the precious metal had seen an increase in value of 367 per cent against the euro. In other words: with gold as the reference currency, the euro had depreciated by 77.5 per cent over two decades.
US dollar and euro have lost much of their purchasing power
According to an analysis by the precious metals company Solit Kapital, the euro has continuously lost value against gold, more specifically nearly 81 per cent: in early 2020, the purchasing power of the euro stood at only 19.2 per cent of its original value. The US dollar depreciated even more against gold since the beginning of 2000: its purchasing power currently stands at a mere 18 per cent of its initial value.
Swiss franc and Japanese yen also have lost significantly against gold
In addition to the US dollar and the euro, the Japanese yen and the Swiss franc are also considered hard currencies, but both have lost a large part of their purchasing power in a 20-year comparison against gold. According to Solit Kapital, at the beginning of 2020, the Swiss franc’s purchasing power stood at only 28.7 per cent of its 2000 value, and the yen’s at only 17.3 per cent. Other currencies were, however, much worse off, such as the pound sterling, which lost 85.9 per cent, and the Indian rupee, which have lost 89.1 per cent of their purchasing power since 2000.
Incidentally, the purchasing power of gold has hardly changed over the centuries: although the precious metal has always been subject to strong price fluctuations, the value of gold in long-term averages has proven surprisingly stable. For one ounce of gold, you would be able to purchase the same amount of bread as as 2000 years ago, about 300 loaves, as the fund manager and non-fiction author Uwe Bergold impressively calculated in an interview with the German financial news outlet Focus Money.