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Here's Something To Drink To - Gold Holds Purchasing Power Vs. Beer

Kitco News

(Kitco News) - The world’s biggest beer festival will kick off this weekend in Munich, Germany and in an interesting twist for gold investors, the price of beer in gold terms is relatively stable, according to research from a European investment firm.

In its unique gold/Okoberfest beer ratio, Incrementum AG noted that gold’s purchasing power is holding around its historical averages, while the price of beer in euros continues to rise.

This year festival goers will pay €11.10 per one-liter stein or Maß of beer, an increase of 2.8% from last year. At the same time, one ounce of gold will buy 93 liters of beer, down from 101.90 liters in 2017.

“Rising beer prices and a falling gold price are forcing gold investors to be moderate this year,” wrote the analysts, who also create the annual “In Gold We Trust” report. “Measured against the historical average of 89 Maß, the ‘beer purchasing power’ of gold is slightly above the long-term average.”

Since last year’s festival, gold prices have declined nearly 7%. Gold has been stuck in a rut for the last five weeks, holding critical support above $1,200 an ounce. December gold futures last traded at $1,208.40 an ounce, up 0.46% on the day.

The analysts explained that the unorthodox research continues to show how gold is able to preserve its value and purchasing power.

“The steady loss of purchasing power of the euro is clearly visible, while gold has not lost purchasing power in the past seven decades, despite some fluctuations,” they said. “The comparison with the gold/Oktoberfest beer ratio thus makes one thing certain: gold protects against paper money’s ongoing loss of purchasing power -- or expressed in Wiesn terminology: against dry throats.”

According to economists, the 16-day beer festival generates about €1.3 billion in economic activity for the region as 8 million liters of beer is expected to be consumed.

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