For centuries, gold has been the bedrock of the global financial system—a steadfast bulwark against the reckless whims of governments, central bankers, and their inflationary printing presses.
In a world where trust in paper promises is waning, gold stands as a steadfast symbol of enduring value. Let’s unpack its role and why it’s been a hedge against inflation since the days of empires.
Gold’s story in finance stretches back to ancient times.
The Lydians, around 600 BC, were among the first to mint gold coins, standardising trade and creating a currency that didn’t rely on the king’s mood swings.
From the Roman aureus to the Byzantine solidus, gold was the lifeblood of commerce, trusted because it was scarce, durable, and couldn’t be conjured out of thin air.
Fast forward to the 19th century, and the Gold Standard took centre stage.
Nations pegged their currencies to gold, ensuring stability and discipline. You couldn’t just print money willy-nilly—every note had to be backed by bullion in the vault.
It was a system that rewarded prudence and punished profligacy.
But then came the 20th century, and with it, the slow erosion of fiscal sanity. The Gold Standard was abandoned in stages—first during the Great Depression, then entirely in 1971 when Nixon slammed the gold window shut.
Suddenly, currencies were “fiat,” backed by nothing but government promises and central bank bravado.
The result? A global financial system addicted to debt and inflation. Since 1971, the US dollar has lost over 80% of its purchasing power, and other currencies haven’t fared much better.
Meanwhile, gold? It’s held its own, quietly mocking the paper-pushers. As a hedge against inflation, gold’s track record is unmatched.
Over centuries, it’s preserved wealth when currencies crumbled. During the Weimar Republic’s hyperinflation in the 1920s, Germans who held gold could still buy bread while others wheeled barrows of worthless marks.
In the 1970s, when stagflation gripped the West, gold prices soared from $35 an ounce in 1971 to $850 by 1980—a 2,300% surge.
Even in recent decades, gold has shone during turbulent times.
From 2000 to 2011, as central banks unleashed torrents of cash following the dot-com bubble and the Global Financial Crisis (GFC), gold climbed from $280 to nearly $1,900 an ounce.
In 2025, with inflation still gnawing at savings and geopolitical tensions simmering, gold is hovering near record highs, proving its mettle once again.
Why does gold endure? Simple. It’s finite, tangible, and immune to the printing press.
Unlike fiat currencies, which governments can dilute at will, gold’s supply grows slowly, tied to mining and exploration. When inflation erodes purchasing power, gold tends to rise as investors seek a safe haven.
It’s not perfect—prices can be volatile, and it doesn’t pay dividends—but over the long haul, it’s a store of value that laughs in the face of monetary mischief.
The lesson? While central bankers play their games, gold remains the ultimate insurance policy.
It’s not about getting rich quickly; it’s about not getting poor slowly.
Thought for the Day
"Gold is money. Everything else is credit." J.P. Morgan
Cory Bernardi is the author of seven books and has been a member of the Australian rowing team, a publican, an investment portfolio manager and spent nearly 14 years as an Australian Senator.
