A critical point is that gold is always the same -- an ounce of gold today is the same as it was 5000 years ago and the same as it will be in 5000 years -- whereas the US$ and all other forms of paper money are constantly changing. The US$, for example, might not exist in 20 years -- let alone 5000 years -- time, and even if it does exist it is certain to be a lot different than it is today. This is one reason why it makes a lot more sense to look at secular trends in terms of how the market in question performs relative to gold than how it performs relative to the dollar. But as far as determining real (inflation-adjusted) performances go, what makes gold better than any other unchanging ph...

A critical point is that gold is always the same -- an ounce of gold today is the same as it was 5000 years ago and the same as it will be in 5000 years -- whereas the US$ and all other forms of paper money are constantly changing. The US$, for example, might not exist in 20 years -- let alone 5000 years -- time, and even if it does exist it is certain to be a lot different than it is today. This is one reason why it makes a lot more sense to look at secular trends in terms of how the market in question performs relative to gold than how it performs relative to the dollar. But as far as determining real (inflation-adjusted) performances go, what makes gold better than any other unchanging physical quantity, or, for that matter, the many other methods that have been used over the decades to adjust for the effects of inflation? Gold is a constant, with its value against commodities staying relatively the same throughout the ages. One reason is that the price of every commodity except gold is strongly influenced by the current year's production and the real cost of production falls over long periods of time due to technological improvements. But in gold's case the existing aboveground stock is always so much larger than new mine supply that changes in the cost or quantity of annual production have almost no effect on the gold price. This characteristic results, in turn, from the fact that although gold might no longer be money in the strict meaning of the word (it is no longer the general medium of exchange), it is still accumulated as if it were money and it still trades as if it were a currency.