Gold's Steady Stand Against Inflation's Tide

Inflation continues to take its toll on the global economy, with higher prices acutely felt during Europe's Oktoberfest celebrations; however, beer and gold lovers have been insulated from higher prices.

This past weekend, investment firm Incrementum AG released its latest much-celebrated gold/beer ratio. According to updated prices, one ounce of gold bought 119 one-liter mugs of beer, also referred to as a Maß.

The analysts at Incrementum noted that in gold terms, partygoers were able to buy only one less beer compared to last year's prices.

However, in euro terms, the analysts noted that beer prices during Oktoberfest increased a whopping 8% to €14, a record price.

"The gold price in euros has almost completely absorbed the massive price increase this year," the analysts said in this year's report.

Looking at the cost of Oktoberfest beer pre-COVID, the analysts said prices have risen more than 26%; at the same time, beer, in gold terms, has actually dropped. Consumers could buy four more Maß, this year, compared to 2019.

Not only are consumers seeing higher prices, but Incrementum noted that they are also faced with shrinkflation, as the size of the beer mugs was smaller than the traditional one-liter steins.

"Those who paid their Maß not with gold but with fiat money, their beer mug was this year no longer filled with one liter of Oktoberfest beer, as in 2019, but with not even 0.75 liters. Consequently, the paper money lover is forced into sobriety by inflation," the analysts said. "Gold has thus protected the gold-affine beer lover very well against (Oktoberfest beer price) inflation in recent years, and therefore, even in times of inflation, the gold-affine beer lover in the euro area was not left high and dry."

Gold is not just holding its value in alcohol. Incrementum's gold/iPhone ratio shows that the precious metal is also seeing improved value compared to the iconic smartphone.

The firm noted that the iPhone 15 Pro with 1 TB of storage now costs just 0.78 ounces of gold, a little more than 10% lower compared to prices last year.

"As a gold investor, you have to spend much less gold for the current iPhone than you did 16 years ago. However, you get a lot more iPhone for less gold. This is because the current iPhone 15 Pro has only the name in common with the original iPhone. The performance of the iPhone 15 is far superior to that of the first-generation iPhone," the analysts said.

Meanwhile, in U.S. dollar terms, the picture is completely different. In 2007, the first iPhone cost $599; however, today, the smartphone now costs $1,499.

"When compared to the first version of the iPhone, this corresponds to a price increase of 150% or an annual iPhone inflation rate of 5.9%," the analysts said.

Originally published by Neils Christensen at Kitco