The Impressive Long Term Purchasing Power of Gold & Silver

[GoldCore]

The Impressive Long Term Purchasing Power of Gold & Silver

We saw a great meme on WallStreetSilver which sparked our essay idea for this week, the meme- The True Value of Gold and Silver compared how many ounces of silver it would take to purchase a corvette in 1950 compared to today – the answer was less!

This meme is a great example of the true value of silver over time. Below we reproduce the meme, but with the modification of the starting year of 1971 – which as we discussed in previous weeks is the year that then-President Nixon closed the Gold Exchange Window (see the post on August 19 “The Changing Role of Gold”).

This is the year that the gold price was taken off the US$35 per ounce fix. As the meme below shows, the cost of a new Corvette in 1971 was $5,496. And that cost has increased to over US$67,000 in 2020 – an increase of 1235%.

However, if we ‘price’ the Corvette in terms of ounces of gold, the Corvette in 1971 would cost 135 ounces of gold compared to the cost of a Corvette in 2020 being only 38 ounces of gold!

The True Value of Gold and Silver

And when ‘priced’ in terms of ounces of silver, the Corvette in 1971 would have cost 3,572 ounces compared to only 3,308 ounces of silver needed to purchase a Corvette in 2020.   

Recreated from the idea on Reddit’s WallStreetSilver

Digging deeper – below we chart the cost of a Corvette for all the years from 1971 to 2020, in the same three measures as above. In US dollar terms, ounces of gold, and ounces of silver.  

Cost of Corvette in the US Dollars, Gold and Silver Chart

What we can see is that the cost of a Corvette in US dollar terms has risen somewhat steady over the last 50 years.

The Long Term Purchasing Power of Gold and Silver

However, since gold and silver price markets do not move in a straight line. The cost of a Corvette in terms of ounces of gold and ounces of silver has changed significantly, the cost of a Corvette was as low as 21 ounces of gold and 631 ounces of silver in 1980. And the cost of Corvette was as high as 149 ounces of gold and 9259 ounces of silver in 2001.

So, although yes, it is true that the number of ounces of gold, and of silver, it takes to purchase a Corvette has gone through cycles over the last 50 years. The point we would like to close with is that, although this purchasing power of gold and silver is disrupted in the short and even medium-term – the long-term (50 years) purchasing power of gold and silver being able to purchase goods and services has remained impressively constant.

So this just shows evidence for how long the elastic relationship between paper money and precious metals can stretch…not for 50 years, but yes it can for 10 years and even 20 years.

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[Tn21]

I have only been in the metals scene for a brief period but it is definitely apparent to me how the value holds and the purchasing power is protected somewhat. 

Thanks for sharing. 

[LawrenceChard]

21 hours ago, GoldCore said:

The Impressive Long Term Purchasing Power of Gold & Silver

We saw a great meme on WallStreetSilver which sparked our essay idea for this week, the meme- The True Value of Gold and Silver compared how many ounces of silver it would take to purchase a corvette in 1950 compared to today – the answer was less!

 

I presume you mean a Corvette, more specifically a Chevrolet Corvette.

Accordiing to Wikipedia "A corvette is a small warship." 🙂 I don't know how much a small warship would have cost in 1950, or indeed nowadays, but I suspect it might cost more, even measured in terms of gold.

Now back to a Chevrolet Corvette car. Back in 1950, these were a pile of American c**p, fast(ish) with a big engine, but crude, and cheap, compared with most European or internation car marques and models. I believe they are now much improved, but still better in straight lines than round corners and bends. In which case, it makes a modern one even cheaper in terms of precious metal than an early version.

 

[StackemHigh]

I'm only looking at gold as a protection of wealth.  My moto is spend money whilst you can enjoy it!

Gold purchases stop me buying jelly babies and motorcycle parts n bikes! I enjoy 'em all. 

If i reach retirement them I'll sell bits n pieces for holidays and boob jobs for the 20 year-old girlfriend! 

Enjoy life! 

[Coverte]

1 hour ago, LawrenceChard said:

I presume you mean a Corvette, more specifically a Chevrolet Corvette.

Accordiing to Wikipedia "A corvette is a small warship." 🙂 I don't know how much a small warship would have cost in 1950, or indeed nowadays, but I suspect it might cost more, even measured in terms of gold.

Now back to a Chevrolet Corvette car. Back in 1950, these were a pile of American c**p, fast(ish) with a big engine, but crude, and cheap, compared with most European or internation car marques and models. I believe they are now much improved, but still better in straight lines than round corners and bends. In which case, it makes a modern one even cheaper in terms of precious metal than an early version.

 

 

I can't speak for now - but in 1978 when I bought their 25 year 'Jubilee Edition, the quality was pretty poor, the internal cover of one of the targa tops fell off into the seat below as the minimal ammount of glue melted!! - but still  fast in straight lines and still lousy cornering.

[Bigmarc]

3 hours ago, Coverte said:

 

I can't speak for now - but in 1978 when I bought their 25 year 'Jubilee Edition, the quality was pretty poor, the internal cover of one of the targa tops fell off into the seat below as the minimal ammount of glue melted!! - but still  fast in straight lines and still lousy cornering.

Can you remember how much it cost you?

 

[Bigmarc]

4 hours ago, StackemHigh said:

I'm only looking at gold as a protection of wealth.  My moto is spend money whilst you can enjoy it!

Gold purchases stop me buying jelly babies and motorcycle parts n bikes! I enjoy 'em all. 

If i reach retirement them I'll sell bits n pieces for holidays and boob jobs for the 20 year-old girlfriend! 

Enjoy life! 

Exactly. You are probably best buying a corvette in fiat as you may find the cost rises alongside the average wage without the big a*se dip in the middle. 

I once worked it out in pints of beer. In the 70s I could buy 100 pints per Oz. Think I can buy 320 now. 

[Coverte]

1 hour ago, Bigmarc said:

Can you remember how much it cost you?

 

No, but it was certainly at least double the price of the example in the image - and that was in pounds!

There was rampant inflation in the 1970's and I had a very good business and being unmarried and in my early/mid 20's was pretty wild and had a used '73 Corniche Convertible after that.

Then I got married, the breeding programme commenced in due course and my motoring tastes quitened down - although I still to this day have an E Type I bought back then for weekends for £2,200!!