How Is Gold a Store of Value?
Although gold is no longer used daily as a medium of exchange for common purchases, it has served for thousands of years as the most consistent form of real as well as alternative money in global history. In this role, gold remains the most loyal hedge against debased currencies and the growing forces of inflationary wealth destruction.
Like any real asset, gold is not a perfect constant, as no such constant exists in the study or history of economics. That said, no other asset has ever been more constant–from the first Persian trading huts or the empires of Rome to the modern era of central bank-driven (distorted) capitalism.
History further confirms that government issued money, unbacked by gold, always (repeat always) loses its purchasing power.
When measured against a single milligram of gold, the major currencies of the modern world have lost greater than 95% of their value since Nixon decoupled the USD from the gold standard in 1971.
Those looking to both preserve and transfer wealth through the generations require finite assets of infinite duration which can’t be created (i.e., printed or mouse-clicked) and hence debased by sovereign policy makers or levered OTC participants.
For years, many investors have been understandably lulled into the financialization of wealth provided by rising risk assets like stocks, bonds, real estate and even cryptos, as the opportunity cost of owning a stable of value like gold has been eclipsed by the extreme and seemingly immortal inflation/rise in these bubble assets since 2008 in particular.
Unfortunately, all bubble assets, as well as all fabricated fiat currencies, inevitably and eventually implode. Measuring portfolio, personal or even generational wealth in such assets and currencies is therefor as seductive as it is risk-intense.
This is why generations of sophisticated institutional, sovereign and family wealth have always managed such risk with meaningful allocations of physical gold, what we recognize ultimately as fire insurance for currencies already burning to the ground. See, here.