Voima Weekly #44 – Is Gold Always in a Bull Market?

The Stretching Ruler. Illustration created with AI assistance.

In 1971, the world finally moved away from the gold standard. Since then, the U.S. dollar has lost more than 99% of its value relative to gold¹. The same phenomenon can be observed in the euro, the pound, the yen, and nearly every other major currency.

This has given rise to a claim that is heard increasingly often: “Gold is in a permanent bull market against fiat currencies.”

Is it true? Historically, the answer appears to be yes.

But the reason is not that gold is an exceptionally productive investment. Gold does not pay dividends, develop new products, gain market share, or have a management team.

The answer lies in the currencies themselves.

When the global money supply grows year after year faster than the supply of gold, each unit of currency represents a slightly smaller share of the whole. The supply of gold grows slowly, while the supply of fiat currencies grows rapidly.

Over the long run, the result becomes visible in the price. Many people, however, focus on the volatility experienced along the way.

In Weimar Germany, the price of gold in marks could rise or fall by tens of percent within a matter of days. To many observers, this proved that gold was too volatile to serve as a reliable store of value². History, however, showed that the real problem was not gold's volatility but the collapse of the mark itself. Gold holders had to endure volatility, but cash holders ultimately lost nearly all of their purchasing power.

Volatility and risk are not the same thing. Volatility refers to price fluctuations. Risk refers to the permanent loss of purchasing power. This is why gold's daily, monthly, or even yearly price movements can appear dramatic, while the more important long-term question remains: does capital preserve its purchasing power?

Could gold's bull market eventually come to an end? Certainly. If money supply growth slows, real interest rates rise sustainably, government debt levels come under control, and confidence in fiat currencies strengthens, the upward pressure on gold could diminish. But as long as the supply of currencies grows significantly faster than the supply of gold, gold's long-term appreciation looks less like a speculative bubble and more like the dilution of currencies.

Historically, such a reversal has been rare. Perhaps, then, the real question is not whether the price of gold will rise. The question is what happens to the unit of measurement used to price gold.

Voima Account was built around this idea.

If a portion of savings is held in an asset whose supply grows slowly and cannot be expanded by political decision, the saver does not need to predict the next interest rate decision, budget deficit, or stimulus program.

The objective is not to outperform the market, but to preserve purchasing power.

Ultimately, wealth is not measured in euros. It is measured by what those euros can still buy.

– Marko Viinikka
Founder, CEO
Voima Gold Oy

Disclaimer: Voima Weeklies are the personal writings of the undersigned. They do not necessarily represent the official view of Voima Gold Oy or any other company, nor do they constitute investment advice or a recommendation to purchase securities.