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Gold Provides Protection from Rising Gas Prices

By LINDON, Utah - May 15, 2018 No Comments

Gas prices have been going up all year, and rising tensions over Iran's nuclear program threaten to send them even higher. Unfortunately, this is not a new problem for American consumers. The price of gasoline has been rising steadily over the last several decades. If you are looking for a way to lock in gas prices and protect yourself from future increases, gold can provide that protection for you.

According to AAA, the average retail gas price in America was $2.86 as of May 11. That is an increase of 22 percent from only $2.34 in May of 2017. Prices at the pump are already at their highest level since 2015, and we could easily see them go higher as demand picks up during the summer driving season. However, there is a way out of this for investors because gold continues to provide protection. The gold price has risen 8% since May of last year, and the long run record against gasoline is even better. 

Gas prices have soared over the last several decades, but gold has gone far higher. You could buy a gallon of gasoline for just 60 cents in early 1976, so gas is up an astonishing 377% over the last 42 years. That is a ferocious increase, and the 1 or 2 percent rates that you get in the money market are never going to keep up with it. Gold was only $128 an ounce in 1976, but today it is $1,318 per ounce. Gold went up 930% in paper dollar terms while gasoline rose just 377%.

These spectacular price increases are not a random accident, but the direct result of going off the Gold Standard. On a gold basis, the price of gasoline is less than half of what it was 42 years ago because of improved technology. Gold keeps up with gas in the long run, and it also tends to go up at the same time. That's because it is not actually gold and gasoline that have wild price swings, but fiat money. As the government prints money and accumulates debt, the US dollar falls. Precious metals and gasoline are real goods with limited supplies, so their prices must go up in dollar terms when the dollar falls. 

As Ronald Reagan once remarked, "And as this man suggested, if you looked at the recurrent price rises, were the OPEC nations raising the price of oil or were they simply following the same pattern of an ounce of gold, that as gold in this inflationary age kept going up, they weren't going to follow our paper money downhill? They stayed with the gold price." Your savings don't have to go down with paper money either. You can keep up with gas prices by holding gold.