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Up Your Average is the “no nonsense” podcast made for interesting people who think differently. Learn to navigate your life with unconventional wisdom by tuning in to Keith Tyner and Doug Shrieve every week.
What that has basically shown is that the value of the dollars, the US dollars, has declined dramatically. So if you're gonna put a dollar in your drawer and leave it there, it's gonna be worth less and less and less. So the question is, why would my friend physically possess this piece of gold or even crazier, this this piece of gold?
Caleb:Welcome to the Up Your Average podcast, where Keith and Doug give no nonsense advice to level up your life. So buckle up and listen closely to Up Your Average.
Keith:Hey, friends. I know it's rude for me to be munching on a Hershey bar while I'm hanging out with you, but I just couldn't resist the temptation. Back in the early seventies, by around 1974, even Nurse was my fourth grade teacher. And she believed in reading aloud to students and she pulled out a little Roald Dahl in Willy Wonka and the Chocolate Factory to read to us. And that book mesmerized me because of the possibility of being Charlie and taking over that chocolate factory.
Keith:In that book, the setting was roughly 1950s and this older fellow was going to have to have a succession plan for his factory and he brought these kids in there. And when they did that, a chocolate bar, a Hershey bar back in the 50s was priced at about 10¢. And the goal was they would get that golden ticket to get to go into this famous chocolate factory. But if we skip forward and say that the golden ticket is the ticket to understanding of gold and how it works in our economy, that's what I wanted to kind of spend some time talking with you about. So if you go from 1950, that a Hershey bar was about a dime, 1970, that same Hershey bar was about a dime, then 1980, it costs you about 25¢.
Keith:And then today in 2025, when I bought that, it was a $1.69 The cost of the Hershey bar seems like it went up, but it did not go up. The value of our money has dropped. It stayed relatively stable between 1950 and 1970, and then inflation just took off. And so what I want you to understand is gold has been used as money in The US for a long time, the way back to our founding. Money needs to be something that's scarce, valuable, and easily transferable and gold fit that bill for many people.
Keith:In US history, we started with that kind of idea that it was used as an exchange mechanism. And then in April 1933, we had just come from the crash in 1929 into the great depression, President Roosevelt, by executive order, made gold an illegal thing for US citizens to own. And on 05/01/1933, if you had gold, you had to turn it into the US Treasury at the Federal Reserve, and they would give you $20.67 an ounce for your gold. And I want to stop there for a second and give you an idea of an ounce of gold. So this chocolate bar here isn't really a chocolate bar.
Keith:I was just giving you an idea of the magnitude of gold and how it works. And so inside this package is an American Eagle, which this is a one ounce American Eagle. This one ounce American Eagle, if it was a coin back in 1933, and I had to give it back to the US government, they were going to give me $20.67 for it. Okay? And I wanted to just show you the transportability of gold by how small that is relative to this Hershey's thing.
Keith:A friend loaned me this to use for this show today, so they also loaned me this, they were very generous. This is a 10 ounce gold piece. And if you look at this 10 ounce gold piece relative to the Hershey's bar, you could probably get almost three of these or 30 ounces in the size of a Hershey package. And so in 1933, you would have had to take your gold coins and give it to the US Treasury at the Federal Reserve and they give you $20 of US dollars and 67¢ for your ounce of gold. Then a year later, president Roosevelt signed the Gold Reserve Act and it made it illegal for you to have this anymore.
Keith:You couldn't have this in your possession. And they raised the price of gold, the valuation of gold to $35 an ounce. Because what was happening at that point in time, the amount of dollar bills they could create was limited by how much gold the US government had. And by raising the value of gold, they could print more money. So essentially when they did this, they were devaluing the money that you already had in your possession.
Keith:They had taken away your precious metals and made your money worth less. So in essence, you'd have had to give them more of your money for a chocolate bar, even though the cost of it didn't really go up, it was just the value of your dollars went down then. So from 1934 on to 1971, well beyond 1971, it was illegal for citizens to physically possess gold, US citizens. In December 1971, President Nixon took us off the gold standard and put us on what's called a fiat standard, which basically says, a fiat standard says the government tells you how much your money is worth. In other words, your money is not backed by anything, it's just backed by the ability of your government to tax and make it valuable.
Keith:And that happened in 12/31/1971. It shook up the world economies because the world kind of leaned into The US and the fact that we went off the gold standard was traumatizing to the world economies at that point in time. Seventies were a difficult economy, it was a hard time to make a living. Then in December 1974, 12/31/1974, President Ford made it legal for you to possess gold again. And so that's a little bit of the history of gold in The United States.
Keith:And to give you some dollar history of it, this one ounce of gold was worth 2,067 in 1933, Then when the government had it all or all that people disclosed to them, they raised the value of it to $35 an ounce. Around 1971, when president Nixon took us off the gold standard, it was about $40 an ounce. And then with the resulting inflation of that and other decisions that were made in 1974, this would have gone up in value to 185 to buy this thing. Excuse me, 1980, was the most recent peak before now, this same coin would have cost you $850 And then today, 10/07/2025 gold earlier today crossed over $4,000 an ounce, which would have said this same coin was worth $4,000 an ounce. And what that has basically shown is that the value of the dollars, the US dollars, has declined dramatically.
Keith:So if you're going to put a dollar in your drawer and leave it there, it's going be worth less and less and less. You might have experienced that if you traveled to Mexico twenty years ago and then wanted to take that money back with you to Mexico, you would have seen that same devaluation. So the question is, why would my friend physically possess this piece of gold, or even crazier, this piece of gold? And the reason one might physically possess it historically, one is a distrust of the local government system. If you say lived in Venezuela where the currency is worth basically nothing, and you needed to have an exchange, having something that is universally accepted as value is much more palatable to people than to just have the local currency.
Keith:That's a reason. It's easy transfer. If this was mine, I could give it to Amanda and nobody would even know other than you guys watching that this transfer took place and it's not trackable. It's just like the coins in your pocket are not trackable of the transfer of that money. So why not physically own this?
Keith:A reason to not physically own it is this 10 ounce one today would have crossed over $40,000 Nobody knows besides you guys as I'm recording this, that I was able to borrow this and have this $40,000 before this is published. It'll be back in the hands of the rightful owner and they'll secure it however. But there's a safety issue with it. There are storage costs. If you want somebody to store it for you, it's going to cost some money and you'd have to pay that.
Keith:It's difficult transporting this. I was reading on the TSA yesterday, what I'd have to do if I jumped in an airplane with this and you have to give them some advance notice and give them the idea of how you got this and it came into your possession, what you're going to do with it. And it's relatively illiquid. And when I say it's relatively illiquid, let me show you the history of the US dollar valuation of gold here. If you look at the history of this, it goes nowhere for long periods of time.
Keith:This goes all the way back to 1925, goes nowhere. The blue line is the real valuation and the orange line is that affected by inflation. And so the blue, can see this peaking of the value of gold back in the 70s and into the 80s. And then the most recent rallies of gold, you can see that going on there. But then if you put the inflationary value of it there, you can see that today the inflationary value of gold is hit an all time high.
Keith:And so today, that's what gold has done in a historical basis. But notice the angles here, that the angles are exact same angle up as the angle down. And so gold historically doesn't go anywhere for long periods of time until it spikes. But then when it spikes, you'll see that it comes right back down on the same angle. So that's the sharing of that for you.
Keith:So then that's the picture of gold and why you might not want to physically hold it for too long. Because if it spikes up and it hits one of those peaks, you're going to have to act quickly with it to get it transferred. Not only that, you have to pay with physical gold, you don't have ordinary capital gains rates. You have to pay a collectibles tax rate, which basically treats your gains, your long term gains on gold as ordinary income, it's treated as ordinary income until you get into the marginal tax bracket of 32%. And then once you cross over into the marginal tax bracket of 32%, then the maximum tax rate on your gains on collectibles is 28%.
Keith:So what I would tell you today is that if you own physical gold, it's a good time to be talking to your advisor about it and for strategies with it. A strategy of why you might want to have it if you don't trust your government, is you can diversify your gold by allowing others to take physical possession of it and hold it for you for safekeeping. And if you had 20 relatives and you gave them 20 ounces of gold, they could hold that 20 ounces of gold in 20 different places. So you have the security of not having all your gold in one place. If you need some help having somebody professionally store it for you, we've used Fidelitrade, fidelitrade.com over time.
Keith:And this is their website and they historically have good prices on gold. You can see down here that they're quoting the $3,962 to $4,000 for an ounce of gold, or if it's the American Eagle, it's $3,993 to $4,118 today. And so the Dela trade is a good place to get information on how to secure gold. But again, if you transfer that gold to a reservoir like that, and you have the physical gold because of the distrust for the government, you lose some of that original motive for having that. So in closing, I'd tell you, if you want something interesting to do, go check out the origins of that old movie, The Wizard of Oz.
Keith:Did you ever know that a lot of it was written about the same idea that I'm talking about, the distrust of government and the valuation of gold. And the Wizard of Oz, O Z is an abbreviation of the word ounce, which is one ounce is the American Eagle. Thanks for taking time to hang out and make today today a great day.