Gold Doubles in Two Years, Challenging Fiat Money

Gold doubles in two years as fiat loses ground

Gold prices have doubled in just two years. Notably, this occurred while the euro posted one of its best relative performances among major currencies. If even a strong currency is losing out against the metal, the rest of the landscape tells its own story. The starting point for analysis is uncomfortable: Is there a gold bubble, or are we witnessing a loss of confidence in fiat money that hasn't yet fully impacted prices?

Long-term data supports the latter view. A tenfold increase over twenty years, equivalent to an average annual return of 12.2%. This figure reads as hidden real inflation: what official indices miss but grocery bills reflect. With gold back at $4,000 per ounce trinc Trump's tariff threats, the narrative of monetary debasement gains traction.

How much has gold risen in 20 years?

Approximately 700%, nearly matching the S&P 500's cumulative return over the same period. This parallelism unsettles both sides. If a non-yielding metal and an index of corporate profits perform equally well, it isn't them moving—it's the common denominator: liquidity. The shared driver would be unprecedented monetary and credit expansion, inflating both bullion and stocks simultaneously.

Some add operational advantages to the metal: no reliance on potentially insolvent intermediaries, no management fees, and no audit failures. However, its price pays no dividends. No one earns interest by holding it.

A parking space once worth a kilo of gold

The most common anecdote explaining this phenomenon involves real estate. A parking space sold in 2009 for €18,000, equivalent then to one kilogram of gold. Today it’s worth about €25,000, which equals only 250 grams of gold. Measured in gold, the investment lost 75% over fifteen years, according to circulating calculations. In euros, however, it gained €7,000.

The same exercise applies to weekend dining: some note that a restaurant menu now costs what an ounce of silver did, and next year will cost more in euros but still equal one ounce. This is the domestic version of the thesis. The distortion lies not in gold's price, but in the unit used to measure everything else.

The euro also dilutes: money supply grows 40%

According to current estimates, the eurozone's money supply increased by around 40% in just a couple of years, with this excess not yet fully reflected in consumer prices. The official argument is that this liquidity stays in financial assets—gold included—and thus doesn't hit the CPI. The problem arises when it does.

Historical records provide the most cited figure. Gold reserves sold by the Zapatero government would be worth seven times more today, approximately €15.09 billion. The standard bar, weighing about 400 ounces, now exceeds $1.6 million. Those who sold low weren't individuals with coin collections.

Gold bubble or regime change?

Charts support both interpretations. Some compare the current trend to the 1979 rally, warning that history rhymes: gold continues to climb, and silver, which has already outperformed gold year-to-date, may set the pace. In Australia, street queues to buy metal have become a recurring image. For seasoned investors, this is the photo preceding the scare.

On the other side, the antiestéticar is different: buying at highs. It is acknowledged that any correction would likely be short-lived, but missing the entry point is frustrating. Prudence leaves many sidelined.

Can you pay with gold in stores?

Legally, it is not legal tender, but experiments have been made. There was a time when Banco de España's €12 silver coins—.925 fineness, 18.20 grams—were exchanged for banknotes and used to pay for groceries, drinks, and local shops. Accepted without issue, often directly into the shopkeeper's pocket rather than the register. Silver pieces have also been used in neighborhood stores, with clerks calculating exchange rates on the fly.

Those denying gold is money counter: that is barter; merchants value the object and must sell it later for cash to buy their own food. And a supermarket refusing a gold bar defines nothing: they don't accept yen either, the inverse argument goes. Gold has its own currency code, XAU, and continues to count as a monetary reserve. When asked about the Netherlands' solvency, the central bank governor replied simply: "We have gold reserves."

Where do those leaving fiat put their money?

The most common answer when asked where to invest besides metal: value funds, Bitcoin, and global indices like MSCI World or S&P 500. The most orthodox portfolio defended by gold advocates includes none of these. Only gold and real estate, with housing paid off as soon as possible. The reasoning is preservation, not speculation: high salaries miccionan risk-taking isn't necessary, and losing money changes lives.

Some went further, buying what no one wanted. Cheap properties from €25,000 to €35,000 that now double or triple in value, generating rental income along the way. A subsidized housing unit (VPO) that sold for €15,000 years ago and nobody wanted is now listed for €70,000. Housing scarcity drives the rest. The conclusion is simple: money is lost in banks and earned almost everywhere else.

With gold at $4,000, stocks at highs, and money supply growing, the unanswered question is which asset is lying: the metal that rose as much as stocks over twenty years, or the paper that buys less each day?

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Disclaimer: This article reflects opinions and calculations shared in an investment context and does not constitute financial advice.