Update: Why do People Invest in Gold?

I can hardly believe that this blog is still public.  I think it is appropriate to pickup where I left off 14 years ago.  I want my first post after the long Hiatus to be an update to the numbers on my Gold post in historical regards.

Some people have an understanding of why so many people invest in gold, but i hope to shed some further light on this subject on the uninformed, and maybe some extra insight even to the ones that know already.  The main purpose for people to invest in gold is not for capital appreciation, though based on the increases in the price of gold over the years this might seem to be the case.  The purpose is capital protection against inflation and against down turns in the market.  Inflation is linked with the concept of  Fiat Currency, which is money that holds no intrinsic value to it other then through government regulation.  Which also means the Value of the currency can go up and down based on the total supply of it in the Economic System.

As of today the current gold price is  $2635 per Troy OZ.  For bread im going to use bread prices from Wegmans prices are about 5.50 but i think is a good base for the comparison as i am still i the same region as when i did the initial calculations.  Using the above price and price of a loaf of bread we come out to 479 loaves of bread for 1 OZ of Gold.  The numbers are not inflation adjusted as i want to see the inflation.

This to me means either gold has increased outside the rate of inflation.  Or Prices on the inputs for bread making had been insulated from the inflation rate increases as much as i would have expected.  Suggestion is government subsides on wheat production to keep food prices lower then inflation rate.

*Previous Post details below*

Gold on the other hand is used as a hedge against inflation and to protect the value of your current assets into the future.  The best method for demonstrating this is not to compare the value of it to a Fiat Currency but to the value of other material items.  I will use an example i found for comparing the value of 1 oz of gold to the cost of bread.  Scholars estimate through persevered records that in 400 BC. 1 oz of gold could purchase you 350 loaves of bread, now compare this with the modern cost of bread in USD and compare with the value of 1 oz of gold in USD.  Gold is currently at around  $1400USD for 1oz. of Gold which divided by 350 comes out to $4USD per loaf of bread. Seems to me a fairly accurate comparison when u take into account this is over the span of almost 2,500 years of human history.  Though due to speculation on the price of gold will raise the price of gold artificially to create a bubble, which would account for the difference in the price of bread to gold ratio being different by a few cents.  The chart below shows the value of the US dollar in purchasing power since the creation of the Federal Reserve.