Gold recently reached a record high of $5,111 per ounce amid geopolitical uncertainty and questions about the dollar’s stability. For centuries, gold has played a distinctive role in the global economy: as money, a store of value, and a hedge against uncertainty.
One of the clearest ways to grasp gold’s role is surprisingly simple and practical.
What can one ounce of gold actually buy?
Viewed this way, a striking pattern emerges: over long spans of time, gold’s purchasing power remains remarkably consistent, even as fiat currencies rise and fall.
Across generations, a single ounce of gold has quietly preserved real buying power.
A Dinner at the Savoy: Gold vs. Wages Over 50 Years
A contemporary illustration comes from one of London’s most famous restaurants: the Savoy Grill.
George Cooper, Chief Investment Officer of Equitile Investments, examined how the cost of dining at the Savoy has shifted when measured in wages versus gold. He revives the “Savoy Gold Ratio,” a comparison first used in the 1970s by City investor Julian Baring to show gold’s long-term purchasing power against depreciating fiat currencies.
The contrast is revealing:
Measured in wages, a dinner for two at the Savoy has stayed consistently costly — roughly three days’ worth of average UK wages from 1971 through today. In other words, rising nominal wages haven’t made fine dining at the Savoy substantially more affordable for the average worker.
Measured in gold, the picture changes dramatically.
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Gold’s Purchasing Power: One Ounce, Fourteen Dinners
In 1971, when a sirloin steak cost £1.55, dinner for two at the Savoy cost £11.33 — which was about 0.68 ounces of gold at the then-fixed $35/oz price. By January 2025, Cooper and colleagues ordered celeriac velouté, beef Wellington, and wine at the same restaurant; the bill for two came to £472.65.
With gold trading around $4,642/oz at the time, that meal required just 0.14 ounces of gold — roughly the weight of a thin wedding ring.
The result is telling: one ounce of gold purchased dinner for three people in 1971; today it buys dinner for about fourteen.
With gold now above $5,000/oz, that same ounce stretches to cover even more.
Not Just a Metal: A Long-Term Store of Value
Julian Baring put it succinctly in 1989: “I regard gold as a form of currency. If you hold an ounce of gold for 20 years, I believe it will buy you the same number of Savoy dinners at the end of that time as it would have done at the beginning.”
Decades later, Cooper’s analysis shows Baring’s point was conservative: gold didn’t merely preserve purchasing power — its ability to buy real goods increased significantly.
The Savoy itself hasn’t changed in quality or become cheaper. What changed is the value of currency. Gold absorbed decades of inflation while paper money steadily lost value.
That pattern repeats across many goods and services: priced in gold, items tend to remain stable or decline over long periods; priced in fiat currency, they generally rise.
The Famous “Gold Suit” Example
Another long-standing comparison spans a century and reinforces the same point.
In the 1920s, a well-tailored men’s suit cost roughly $20–$30, which matched the price of one ounce of gold at the time. This was not a cheap suit but a quality garment from a reputable tailor, with good fabric and construction.
A century later, a high-quality suit from an established brand, a bespoke Savile Row creation, or a premium Italian label commonly costs $4,000–$5,000 — again close to the current price of one ounce of gold.
The suit’s craftsmanship and materials have not fundamentally changed; what changed is the currency used to measure its cost. The dollar has lost more than 95% of its purchasing power since the 1920s, while gold has preserved its real value.
Whether buying a dinner at a top restaurant or a well-made suit, the takeaway is consistent: gold preserves wealth across generations; fiat currencies do not.
What About Gold’s Traditional Drawbacks?
Critics correctly note that gold requires storage and insurance, pays no dividends, and has periods where it underperforms stocks and real estate. Those are valid considerations.
However, these objections miss gold’s primary purpose. Gold is not primarily intended to outperform productive assets; it is intended to preserve purchasing power when currencies are weakened.
The Savoy Gold Ratio illustrates this: while the pound has lost the vast majority of its purchasing power since 1971, gold has maintained and increased its ability to buy real goods and services.
Why Gold’s Role Matters for Your Portfolio
Most people frame gold in dollar terms: “gold up,” “gold down,” “volatile.” But gold’s essential role is simpler: to preserve purchasing power over time.
Currencies can be expanded and devalued; gold remains scarce, durable, and universally recognized. Comparisons using everyday items — meals, suits, housing — cut through market noise and illustrate what gold actually does.
Over long periods, paper money tends to lose value while gold tends to hold it. That doesn’t mean gold rises every year, but measured across decades, it consistently preserves the ability to buy real goods and services.
This is why central banks keep gold reserves, why civilizations have trusted it for millennia, and why many investors include it in their portfolios today.
Gold as Financial Insurance
When you view gold as stored purchasing power rather than a speculative trade, its role becomes clear.
Gold is not meant to replace productive assets like stocks or real estate; it is a safeguard for what you have already built. It functions as insurance against currency debasement, a hedge in times of uncertainty, and a proven store of value that has outlasted every paper currency in history.
The simplest question often reveals the most: What can one ounce of gold buy today — and what will it buy tomorrow?
History suggests the answer is remarkably consistent.
Ready to preserve your purchasing power? Explore reputable gold bullion coins and bars as a way to protect wealth across generations. Whether you are starting to diversify or increasing an existing allocation, physical gold remains one of the most reliable long-term hedges against currency erosion.
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People Also Ask
What is the Savoy Gold Ratio?
The Savoy Gold Ratio, introduced by Julian Baring in the 1970s, measures how many dinners at the Savoy Grill one ounce of gold can buy. It highlights gold’s long-term purchasing power: in 1971 one ounce bought dinner for three people; today it buys dinner for about fourteen, reflecting gold’s preservation of buying power while fiat currency has declined.
Does gold maintain its purchasing power over time?
Yes. Historical comparisons across decades and centuries show that one ounce of gold has preserved the ability to buy quality goods — for example, a fine men’s suit in the 1920s and a similar quality suit today — while the same nominal dollar amounts from the past buy far less today.
How much gold do I need to buy to preserve my wealth?
The appropriate allocation depends on your portfolio and objectives. Many advisors suggest 5–10% of a portfolio in physical gold as protection against currency debasement. Options range from fractional coins to full bars to suit different budgets and goals.
Why is gold better than cash for storing value?
Gold tends to maintain purchasing power while cash loses value through inflation and debasement. Since 1971, the British pound has lost a large portion of its purchasing power, whereas gold has preserved and increased its ability to buy real goods and services. Gold’s scarcity, durability, and global recognition make it a durable store of value.
Is gold a good investment during inflation?
Gold has historically served as an effective hedge against inflation and currency debasement. It is best used as wealth preservation and portfolio insurance rather than as a primary growth asset. Many investors hold physical gold to protect purchasing power during periods when currencies weaken.
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