Gold has a proven ability to maintain its purchasing power over long periods of time. The only reason gold has maintained its purchasing value over thousands of years is that humans have valued it to the same degree over time. Fashions change, but some human preferences apparently remain unchanged.
Has some guru, you mention Jim Puplava, promised that you can greatly increase your purchasing power by owning gold? I don't think history provides much basis for this assertion. He may be a very nice man but I wouldn't trust him with my savings given that sales pitch.
Let's look at a short-term chart of the price of gold, from 1920 to 2003. home.pacbell.net
To the extent that this chart shows a slight upward bias in the price of gold, we can be certain this instead reflects an under-reporting of inflation.
We see four periods when financial panic has created an abnormal spike in the price of gold:
1.) 1929 to 1934 during the Great Depression when FDR outlawed gold ownership by Americans;
2.) 1971 to 1975 when Nixon suspended the convertibility of dollars into gold;
3.) 1977 to 1980 when the oil embargo and very high inflstion made the future value of the dollar very uncertain;
4.) 2001 to the present after the collapse of the stock market bubble.
If you believe something else can preserve your purchasing power better than gold, you have very little historical evidence to support your claim.
Why has gold long been used as money? Gold maintains its purchasing power, it does not rot, it can be divided into any desired portion, it maintains its value, it can be easily transported, and many other attributes. Wheat flour has held its value relative to gold, but 2,000 year old wheat flour does not have the same value as new flour, while 2,000 year old gold has exactly the same value and properties as new gold.
If I want to increase my purchasing power, I must invest in a business or trading activity which yields a profit.
If I invested in African art in 1980 I could have sold for ten times as much in 1990. Yet if I held the African art until today it would be worth little more than I paid in 1980. The same goes for internet stocks and many other things. The profit in trading lies in either: selling something on quickly at a profit; or holding only during the period of price appreciation. It has long been known that it is better to be lucky than smart.
Many believe a profitable business can increase the purchasing power of your investment over time. Yet this chart, which values the Dow Jones Industrials relative to the price of gold, suggests that a long-term buy-and-hold investor can expect little increase in purchasing power.
home.pacbell.net
Gold has a very long history of maintaining the purchasing power of your savings. To increase the purchasing power of your savings requires you do something else, yet the chart above demonstrates that achieving this requires the right choice in timing rather than the right choice of asset class.
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