Purchasing power represents the amount of goods and services you can buy with a currency. You should aim to preserve your purchasing power to ensure that the currency you are working hard to earn today is still valuable in the future when you want to spend it. The key to preserving your purchasing power is two-fold:
Inflation adjusted gold price chart.
- You should hold currency that retains its value over long periods of time.
- You should hold currency that is appreciating relative to most, if not all other currencies in both the short and medium-term.
Gold as a store of value.
Historically, buying gold and silver has been an excellent way of preserving purchasing power over long periods of time. Today it takes almost the same amount of gold or silver to buy a barrel of crude oil as it did 50 years ago. This is in stark contrast to national currencies (also called fiat currencies), like the US dollar, the values of which strongly erode over time. Central banks and governments have set a long-term trend of currency debasement, and it is unlikely that this trend will be reversed anytime soon.
Gold and silver are the only globally recognized currencies that cannot be created out of thin air, which makes both of them great stores of value (preservers of purchasing power) in the long-term. Unlike fiat currencies that can easily be debased, gold and silver remain the ultimate forms of money.
Best way to invest in silver and gold.
Buying gold and silver.
The value of gold, silver, platinum and palladium prices moves in waves. Gold is first and foremost a monetary metal that does very well during times of economic uncertainty. Furthermore, owning gold is a great way to preserve your purchasing power. In times of prosperity, gold also benefits from increased demand from industry and for jewelry.
Just like gold, silver is a monetary metal. Additionally, silver also has wide ranging industrial applications, as it has the highest electrical conductivity of all chemical elements.
The gold/silver ratio is widely followed by precious metals investors worldwide.
As the chart clearly demonstrates, the gold/silver ratio is relatively high at the moment. Many experts therefore reason that this ratio is set to decline over the coming years. The future remains unpredictable, nonetheless the relative differences between gold and silver could offer precious metals investors interesting buying opportunities. Find out more about the gold/silver ratio and gain other useful insights into the precious metals market in our Gold Research section.
Buying platinum and palladium.
Platinum and palladium are part of the platinum group metals (PGM). Their demand stems almost entirely from their industrial uses. This has meant that during past economic booms the prices of platinum and palladium (and also silver) have generally risen. Some platinum coins have been minted in the past, but they have no direct monetary value.
Like gold and silver, physical platinum and palladium are tangible assets. They lack counterparty risk, which makes them reliable stores of value in times of financial distress.
You can leverage the value of different precious metals against each other to optimise the return on your investments.