How to Preserve Your Purchasing Power

gold silver

Accumulate gold and silver is one of them……

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:

  1. You should hold currency that retains its value over long periods of time.
  2. You should hold currency that is appreciating relative to most, if not all other currencies in both the short and medium-term.

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 recognised 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.

How do gold and silver preserve and increase your purchasing power?

If you had invested $10,000 on 1 January 2000 in 3-Month US Treasury bills your purchasing power would have decreased slightly by 1 January 2013. If you had invested the same $10,000 in gold, your purchasing power would have quadrupled, and the return for silver is close to gold. See the chart below.

Purchasing power of gold, silver and treasuries Jul 2012

The US dollar and 8 other major currencies versus gold

Gold rose 7.0% in 2012 against the US dollar. Gold also rose in 2012 against each of the eight other major world currencies presented in the following table.

Gold % Annual Change
USD AUD CAD CNY EUR INR JPY CHF GBP
2001 2.5% 11.3% 8.8% 2.5% 8.1% 5.8% 17.4% 5.0% 5.4%
2002 24.7% 13.5% 23.7% 24.8% 5.9% 24.0% 13.0% 3.9% 12.7%
2003 19.6% -10.5% -2.2% 19.5% -0.5% 13.5% 7.9% 7.0% 7.9%
2004 5.2% 1.4% -2.0% 5.2% -2.1% 0.0% 0.9% -3.0% -2.0%
2005 18.2% 25.6% 14.5% 15.2% 35.1% 22.8% 35.7% 36.2% 31.8%
2006 22.8% 14.4% 22.8% 18.8% 10.2% 20.5% 24.0% 13.9% 7.8%
2007 31.4% 18.1% 11.5% 22.9% 18.8% 17.4% 23.4% 22.1% 29.7%
2008 5.8% 33.0% 31.1% -1.0% 11.0% 30.5% -14.0% -0.3% 43.7%
2009 23.9% -3.6% 5.9% 24.0% 20.4% 18.4% 27.1% 20.3% 12.1%
2010 29.8% 15.1% 24.2% 25.5% 40.2% 25.3% 13.9% 17.4% 36.3%
2011 10.2% 8.8% 11.9% 5.1% 12.7% 30.4% 3.9% 10.2% 9.2%
2012 7.0% 5.5% 4.4% 5.9% 5.2% 11.0% 20.5% 4.4% 2.3%
Average 16.8% 11.0% 12.9% 14.0% 13.7% 18.3% 14.5% 11.4% 16.4%

The US dollar and 8 other major currencies versus silver

The silver price also gained in 2012 against all major currencies. Silver’s results are presented in the following table.

Silver % Annual Change
USD AUD CAD CNY EUR INR JPY CHF GBP
2001 -0.1% 8.5% 6.1% -0.1% 5.3% 3.1% 14.4% 2.3% 2.7%
2002 4.8% -4.6% 4.0% 4.9% -11.0% 4.3% -5.0% -12.6% -5.3%
2003 24.0% -7.3% 1.4% 23.9% 3.2% 17.7% 11.9% 11.0% 11.9%
2004 14.3% 10.2% 6.5% 14.3% 6.4% 8.6% 9.6% 5.4% 6.5%
2005 29.6% 37.7% 25.5% 26.3% 48.1% 34.6% 48.8% 49.3% 44.4%
2006 45.3% 35.3% 45.3% 40.5% 30.4% 42.6% 46.7% 34.8% 27.5%
2007 15.4% 3.7% -2.1% 7.9% 4.3% 3.1% 8.3% 7.2% 13.9%
2008 -23.8% -4.3% -5.7% -28.8% -20.1% -6.1% -38.1% -28.2% 3.4%
2009 49.3% 16.1% 27.6% 49.3% 45.0% 42.6% 53.0% 44.9% 35.0%
2010 83.7% 63.0% 75.8% 77.7% 98.5% 77.4% 61.2% 66.2% 93.0%
2011 -9.8% -11.0% -8.4% -14.0% -7.8% 6.7% -15.0% -9.8% -10.7%
2012 8.2% 6.8% 5.7% 7.2% 6.4% 12.3% 22.0% 5.7% 3.5%
Average 20.1% 12.9% 15.1% 17.4% 17.4% 20.6% 18.2% 14.7% 18.8%

Silver has generated average annual rates of appreciation in all nine currencies that are higher than gold. So silver also fits well within a long-term accumulation plan, but only if you are prepared to accept the volatility that comes with it.

If you are interested in buying to protect your wealth let me know (send me a reply) I will send you the link so you know you have everything covered.

Advertisements