gold-and-beer

Just how much does a dollar buy, anyway? Each day, inflation makes the green pictures of dead presidents in your wallet worth less and less, while speculation and demand makes a dollar’s worth of gold increase in value over time. The value of a dollar’s worth of gold, furthermore, fluctuates relative to the cost of other commodities, currencies, and assets. In one of the most breathtakingly original pieces of economic research, the Lichtenstein-based commodities research institute Incrementium has analyzed the relative value of gold next to that great asset—beer—in order to determine how far an ounce of gold goes towards fueling a good time.

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Taking A New View

One of the great insights of Incrementium’s research analysis lies in their decision to look at gold as a monetary asset rather than a commodity like oil or wheat. With the purely monetary viewpoint, the researchers looked at the relative spending power of gold as opposed to the strict per-ounce value in order to determine patterns and correlation. While the price of gold has dropped in recent months while the dollar has surged, Incrementium reports that the spending power of gold has actually increased relative to the value of currency over the past six months. They highlight this with the novel gold-per-beer ratio that dictates the capability of precious metal to buy a good bottle of suds.

Beer and Gold

gold beer ratio chartThe “Weis/N Beer” ratio is the punctuation of Incrementium’s 140 pages of research on gold. Their chart shows that gold lies in the midst of an upward trajectory, capable of buying around 100 beers per ounce of gold, after hitting a depression in 2000 when an ounce of gold got you only around sixty bottles of beer. This still remains far below the all-time high, reached in 1980 after the early recession and the inflation crisis, where an ounce of gold could buy the equivalent of over 220 bottles of beer, or fifteen cases. During the 1970s, when the elimination of the gold standard created the worst bear market in history for precious metals, an ounce of gold bought you a mere 48 beers.

Takeaways of Relative Buying Power

Despite the poor performance of gold since 2014, investors should remember that gold’s buying power remains strong on account of the fact that the dollar will soon hit a correction, whether induced by the Fed raising interest rates or by a natural peak on its upwards growth trajectory. The spending value of gold, as illustrated by the quantity of beer an ounce can buy, will continue to rise given the lack of long-term confidence in currencies. The gold-to-beer research assembled by Incrementium showcases how precious metals outperform currency, even if they too suffer from peaks and troughs on the market.