Beat Inflation
Gold is your friend over the long term
I was talking to a reader recently about what is truly valuable. They correctly pointed out that you can rely on a $100 bill to be worth the same amount tomorrow as it is today and as it was yesterday. This is almost a given fact in the short term (days, weeks, months). But we all know that over the medium term (years), inflation is slowly but steadily eating away at the value of that $100 bill. What about the long term (decades)?
A constructive way to confirm cash value is being destroyed over medium or long term is to look at housing prices as a proxy for our cost of living. Canadian finance encyclopedia WOWA recently published a chart showing benchmark Canadian home price (1) over my adult lifetime. 40 years ago, in 1985, the average Canadian home price was about $100,000. Fast forward to 2025 and the price is about $700,000. It’s gone up 7X in 40 years. And this is through a period of historically low inflation.
The same chart then includes gold as a second measure of value. In 1985, 7 kilos of gold would buy that average home. In the 40 years since, house prices have varied in the range of 7 to 14 kilos of gold. At present, 7 kilos of gold will still buy you that average home!
Very interesting. Gold and the cost of living (housing) maintain the same value over time. Cash doesn’t.
So what?
You can’t buy groceries, cars, or even houses with gold. Canadian dollars are the only way to get what you need in the short term. You can’t live without dollars.
And, if you only consider gold price in relation to the dollar, over a short or medium term, you will rightfully say that gold is more volatile – going up or down in price – relative to the dollar. Then where does gold fit in?
It fits in the longer term – a decade or more – where gold is retaining value while the dollar is steadily losing to inflation.
If you measure your remaining time on this earth in a decade or decades, that’s long term. Long enough term to Be Prepared and protect some of your future buying power with gold savings. A late 2024 MoneySense article (2) suggests a small holding – less than 10%. The Be Prepared Diversity blog in September 2024 showed a few examples from smart money thought leaders where gold can serve as 20-25% of total savings and investments.
We practice what I preach. We hold between 10% and 20%, including gold producers.
Beat inflation over the long term. Get Gold!