The arguments regarding the superiority of Gold over Bitcoin as an investment has a long history. Analysts like Peter Schiff have always supported gold and predicted that it may reach even bigger heights. On the other hand Bitcoin advocates claim that BTC will be the most effective hedge to cope up with the inflation.
This is because of two main reasons. Firstly, BTC has a fixed supply unlike gold whose supply cannot be determined. And secondly, BTC is portable which makes it a superior hedge as well as long term investment. However, a few days ago CPM group released a video on YouTube whose primary message was that the purchasing power of gold decreases with increasing time.
However, gold is still considered the most effective hedge and store of value which can be utilised during geopolitical and macroeconomic instability. Moreover, gold has maintained a stability in its value throughout the years. Not only gold acts as a proper hedge against inflation but also provides protection during deflation. Moreover we have seen an increasing demand for the yellow metal in recent years.
However, many people disagreed on the video strictly because it preached that gold’s purchasing power decreases just like any other currency. It also provided a chart which showed its real value in the United Kingdom from 1700 to 2011 which apparently is a depreciation graph. However, some analysts claim that the graph had been derived from a book called The Gold Constant which was written by Professor Roy Jastram. However, CPM’s graph on one hand marks a decline and Jastram’s graph implies that gold’s purchasing power has remained stable throughout the entire period. Apart fromJastram’s book there are many other books that have shown a similar trend in gold’s purchasing power which indicates that CPM’s calculation may be at fault.
Until 1914, during the classic gold standard, it was officially deemed as currency and its stability was entirely self regulated. This means that if gold miners were to increase the supply of the metal merely for profit, which in turn would increase the money supply and the price of the goods would also increase. Consequently, the purchasing power of the gold would decline because of the increase in price. Hence, people would stop gold mining and move to businesses of consumer goods. Eventually, the purchasing power of gold would increase and the price of these consumer goods would decrease.
However, that was almost over a decade ago and gold has become much more volatile but its stability has been preserved. And until now, no matter how many cryptocurrencies are launched, some people consider Gold as the superior store of value. And as of fiat currencies, the US dollar has lost 99% of its value against gold since 1930.