Gold gets back on the plus side of the ledger
The dollar’s lost purchasing power translates to higher gold prices over the long run

(USAGOLD – 9/29/2021) – Gold got back on the plus side of the ledger this morning in response to a softened tone yesterday from Fed Chairman Powell during Senate testimony. It is up $9 at $1744.50. Silver is down 15¢ at $22.39. Yields softened this morning, and the dollar improved marginally. Kelsey Williams (Kelsey’s Gold Facts) believes in gold’s fundamental – some might say ultimate – value. He sees gold not just as real money but as the “original” money. Thus, gold is the measure of value for everything else – including the US dollar.

“The US dollar,” he explains, “has lost somewhere between 98-99% of its purchasing power over the past one hundred years. When the gold price hit $2060 oz. last August, it was a one hundred-fold increase over the past century and represented a ninety-nine percent loss in US dollar purchasing power. In inflation-adjusted terms, $2060 oz. in August 2020 is nearly identical to $1895 oz. in August 2011. Both peaks equate similarly to a ninety-nine percent loss in US dollar purchasing power. The increase in the US dollar price of gold from one peak to the next (Aug 2011-Aug 2020) represents the actual purchasing power that was lost in those intervening nine years. Approximately midway between the two price peaks, the gold price bottomed at $1040 oz. in January 2016. This was a fifty-fold increase and reflected a ninety-eight percent loss in US dollar purchasing power.”

Chart of the Day

Purchasing power of the US dollar

Line chart showing the purchasing power of the dollar 1913 present
Source: St. Louis Federal Reserve [FRED], US Bureau of Labor Statistics • • • Click to enlarge

Chart note: Since 1913, the US dollar has lost almost 96% of its purchasing power. Since 1971 and the introduction of the fiat money system, it has lost 85% of its purchasing power. Since 2008, during a period of relative price stability, it still lost over 22% of its purchasing power. 

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