Gold and silver have played an important role in money throughout history. Unlike modern currencies, they can’t be created out of thin air and derive value from their scarcity.
In the covid-19 era, this difference has become more prominent as countries print vast amounts of currency to support their suffering economies. This graphic from Texas Precious Metals highlights how the value of US precious metal coin production compares to US money creation.
In this infographic, we have calculated the value of money supply added as well as bullion minted, and divided it by the US population to get total production per person. Here’s how the January-September 2020 data breaks down:
The value of new US money supply was more than 2,100 times higher than the value of new gold minted. Compared to minted silver, the value of new US money supply was over 6,000 times higher.
Here’s how production has changed on a per day, per state basis since 2010:
Year to date, US precious metal coin production is within a normal historical range. If production were to continue at the current rate through December, gold would be above historical norms at 81 ounces and silver would be within the normal range at 2,175 ounces.
The issuance of US dollars tells a different story. From January to September, the US money supply increased by more than 400% when compared to 2019’s production—with three months left to go in the year.
Of course, current economic conditions have been a catalyst for the ballooning money supply. In response to the covid-19 pandemic, the US government has issued over $3 trillion in fiscal stimulus. In turn, the US Federal Reserve has increased the money supply by $3.4 trillion from January to September 2020.
Put another way, for every ounce of gold created in 2020 there has been $4 million added to the money supply.
The question for those looking for safe haven investments is: which of these will ultimately hold their value better?