1) Gold is real money
Over the 5000 years of human history, many things have been used as money. Only gold has stood the test of time. It has earned its role as real money because it is the only thing that meets three specific criteria for money: a measure of value, a means of payment, and conservation of value. Gold is easily transformed into recognizable forms and quantities for use within various standards of weight and measure. Gold is also rare, malleable, indestructible, and beautiful to look at.
2) Paper currencies - substitutes for real money
Gold is also original money. This is the original standard of value for everything else. The means of payment must be transportable, and gold certainly is. Gold can be easily clothed in recognizable shapes and quantities that can be used within a variety of weight and measure standards.
The gold was stored in warehouses, and the owners were issued receipts reflecting the ownership and claims for the stored gold. Receipts were bearer documents required for trade and exchange. Some consider these transferable receipts to be the predecessors of our modern monetary system.
3) Inflation is caused by the government
One thing should be clear from history: the government destroys money. Inflation is the depreciation of money by the government. It is deliberately practiced by governments and central banks. The effects of inflation are volatile and unpredictable. The US Federal Reserve Bank has been able to gradually reduce the purchasing power of the US dollar over the past century. As a result, the dollar is now worth 99% less than it was in 1913.

More is always less
When the Fed began its grand experiment, the price of gold was fixed and exchanged at $ 20.67 an ounce. This fixed exchange rate was intended to serve as a constraint for the government to avoid overprinting dollars to meet spending needs. Here is a historical example of how inflation was carried out with gold before the printing press was invented and paper currency was introduced.
“The early rulers cut off small pieces from the coins that they collected from their subjects in the form of taxes and other fees. The cut pieces were melted down and made into new coins. Then all the coins were returned to circulation. They were all assumed to have the same value. As this process developed and more and more cut coins appeared in circulation, people became more suspicious and worried. Therefore, the rulers began to change or reduce the content of precious metals in coins. This made it possible to reduce the costs of producing and issuing new coins. There was no more need to mint coins. "
From the example above, it’s not hard to see how anything that is used as money can be altered in some way to meet the government’s need for spending. But this process was cumbersome and inconvenient. And here paper money comes to the rescue. With the invention of the printing press and the continuous improvement of the mechanics of reproducing words and numbers in an easily recognizable form, paper money became "the next big thing."
At first, people were skeptical about the new "money". Coins containing precious metals continued to circulate along with new paper money. Therefore, at least initially, the government needed to maintain some kind of connection between money with a known value and money without value in order to stimulate their use. In the end, this connection was broken, first partially, then completely. And this was achieved with the help of fiat (government decree or order).
Today, our money not only has no intrinsic value, but is constantly inflated and depreciated through subtle and increasingly sophisticated methods such as fractional reserve and credit expansion. The government is causing inflation by expanding the supply of money and credit. And this expansion of the money supply makes the value of all money cheaper. This is why the US dollar continues to lose purchasing power.
Influence of inflation
The constant expansion of the supply of money and credit by governments and central banks is inflation. This deliberate devaluation of money results in a gradual loss of the purchasing power of the US dollar. Over time, the loss of purchasing power leads to higher prices for most goods and services. Loss of purchasing power and, as a consequence, rising prices are the consequences of inflation.
Gold and US dollar
A weaker US dollar means a rise in gold prices. A stable or stronger US dollar leads to a stable or lower value of the yellow precious metal. In other words, over time, the rise in the price of gold is inversely correlated with the loss of the purchasing power of the US dollar. When the price of gold peaked at $ 2,060 an ounce in August last year, it was a hundred times higher than the original fixed dollar price of $ 20.67 an ounce a century ago. This corresponds almost exactly to the 99% drop in the purchasing power of the US dollar mentioned earlier and is an indication that gold is a store of value.
If you believe that the current impact of inflation is underestimated, it means that there is potential for the price of gold to rise. However, the consequences of inflation are unpredictable. And the higher cost of the yellow precious metal suggests that there will be an actual rise in prices first. The price of the precious metal is not growing because people expect inflation to increase. Its rise only reflects the loss in purchasing power of the US dollar that has already occurred. Moreover, it may be years before the value of gold reflects the loss of purchasing power of paper money that has already occurred.