The Investment Value of the Gold Standard

Suppose you had capital valued at $1,000,000. What would you do with that capital? You can spend it, invest it, save it or give it away, or some combination of the four.

Contrary to what your grandfather may have told you, a penny saved is not exactly a penny earned; although in his day that very well may have been the case.

If you would have saved $1,000,000 under your mattress in 1964, today you would have $1,000,000. I know we can all agree that 1 million dollars in 1964 had a lot more purchasing power in 1964 than it does today and the next few points will highlight just how much. In 1964, 1 US dollar had the value of about $7.81 today.

If you were to have made an investment with your $1,000,000 into an interest-bearing savings account with 5% compounding interest, today you would have $ 13,938,696

If you had purchased 28,289 ounces of gold in 1964 with your $1,000,000, today you would still have the same amount of gold  but an asset worth $36,224,064.

In fact, if you had taken your $1,000,000 1964 in the form of quarters, and hidden those quarters under your bed, today the value of those quarters would be $12,280,000. If you’re scratching your head on that one, here is the breakdown:

  • In 1964, quarters were made out of 90% silver, giving them value in and of themselves. Today, the melt value of a 1964 quarter is $3.07.
  • If you had 4,000,000 silver quarters ($1,000,000 worth) then you would have a store of value of $12,280,000.

What This Means for the Gold Standard

If we used gold as our currency, a few things might happen:

  • Your money would have value in and of itself
  • You could buy things in different countries and not worry about exchange rates (everything would be priced in gold)
  • The government could not devalue your money
  • The Government would not be able to go into debt without consequence, or provide bailouts by printing money

Most economists feel that a gold standard would not benefit the average American, but these ideas are great to ponder and provide for some interesting discussion points.

Suffice to say, we aren’t on our way to a worldwide gold standard any time soon (barring a catastrophic 3rd world war or some type of global depression). However, it is always a good idea to diversify your investment portfolio and gold is an excellent way to balance your wealth and guard your value, in case something happens to the economy. Gold is not an investment for those looking to make a quick trade and increase their wealth overnight, but it has proven to hold its value over the long term.

The best way to invest in gold is to in the form of a Gold IRA. Talk to us today about moving your 401k over to a Gold IRA.