Compared to the year 1978, drivers in the USA today can travel more than four times as far with the amount of gasoline that can be purchased for an ounce of gold. In 1978, one could travel just under 4,900 miles by investing an ounce of gold in gasoline, whereas today that distance is 20,500 miles. The gasoline purchasing power of an ounce of gold currently stands at over 600 gallons of fuel – and this is despite the fact that the US gasoline price has nearly doubled since July 2016. However, this increase in gasoline prices is countered by a lower fuel consumption compared to previous decades: On average, cars in the USA today consume only half as much gasoline per mile as they did in 1978.
What the Gold/Gasoline Ratio Indicates
Following the Mac-Gold Index, the Gold/iPhone Ratio, and the Gold/Ski Pass Ratio, it is now the Gold/Gasoline Ratio that vividly illustrates how well the precious metal fulfills its role as a store of value. The team behind the “In Gold We Trust” report has compared the developments in gold and gasoline prices from Independence Day in July 1978 to July 2024. The fact that gasoline prices were compared with those of the precious metal is certainly no coincidence: For the majority of Americans – especially in rural areas – the gasoline price is an indicator of the respective economic situation in the USA. This was also felt by the Biden administration when, in a survey last year, most Americans rated the economic situation as poor, even though it was objectively quite good.
Gold is Primarily a Long-Term Investment
The Gold/Gasoline Ratio not only demonstrates the function of the precious metal as a hedge against inflation and a store of value, but it also shows that gold can indeed disappoint in the short term and should therefore primarily be understood as a long-term investment: The historical low point of the gasoline purchasing power of gold was not in July 1978, but in September 2005, when one could only buy 156 gallons of gasoline for an ounce of gold. In contrast, the peak of the Gold/Gasoline Ratio occurred in the late 1970s during the then-gold rally, when one received a remarkable 925 gallons of gasoline per ounce of gold.