Gold Isn't an Investment. It's a Lie Detector.
For 5 000 years, every serious civilisation on earth agreed on one thing.
Egyptians. Romans. Chinese dynasties. The Ottomans. The British Empire. Different continents, different languages, different gods — and all of them landed on the same answer:
Gold is money.
Then, about 50 years ago, a handful of governments got together and said: nah, we’ve got a better idea. Trust us. This paper is money now.
That experiment is now showing its age. And the people who never understood why gold mattered in the first place are the ones asking what happened to their savings.
That’s the argument made by former investment banker and economist Felix Prehn in his video “If You Don’t Understand Gold, You Don’t Understand Money.” It’s worth 30 minutes of your time, but here’s the short version.
Why gold, out of 118 elements?
Not because it’s shiny. Because it behaves like money is supposed to behave.
• It doesn’t corrode. Pull a gold coin off a 400-year-old shipwreck and it looks the same. Try that with iron or copper.
• It’s divisible. Melt it, cut it, shape it into coins or bars — every piece stays as pure as the whole.
• It’s malleable. One ounce can be hammered into a sheet covering roughly 9 m², or drawn into wire thinner than a human hair.
• It’s genuinely scarce. It can’t be synthesised, can’t be printed. You have to dig it out of the ground.
How scarce? Melt down every gram of gold ever mined, every pharaoh’s tomb, every central bank vault, every wedding ring and the cube fits inside about three and a half Olympic swimming pools. That’s the entire global supply, for eight billion people.
The part most investors get wrong
Gold is not an investment.
An investment produces cash flow. Property pays rent. Shares generate earnings. Bonds pay interest. Gold just sits there, no dividend, no revenue growth, nothing.
So what is it? It’s money. A store of value. A measuring stick that tells you whether everything else you own is actually holding its worth.
Prehn’s illustration is hard to shake. A Roman centurion earned roughly one ounce of gold a month. That ounce bought him a quality toga, a leather belt and good sandals, a smart outfit, in other words.
Two thousand years later, an ounce of gold buys you a decent suit, good shoes, a belt and a shirt.
Gold didn’t go up. The paper moved.
What actually happened in 1971
Before 1971, a US dollar wasn’t paper, it was a receipt. You could walk into a bank and swap it for gold.
The system was formalised at Bretton Woods in 1944: 44 countries agreed the dollar would be pegged to gold at $35 an ounce, and every other currency pegged to the dollar. That’s where “as good as gold” comes from. The whole global financial system was anchored to something that couldn’t be printed.
Then came the 1960s. Vietnam was expensive. Social spending was expensive. The US started spending far more than it had and here’s the catch with a gold standard: you can’t print your way out of it.
Other countries noticed. France called the bluff and literally sent a warship to New York to collect its gold from the Federal Reserve vault. Britain and others started queueing up. It was a bank run — except the bank was the United States.
On 15 August 1971, Nixon went on television and announced the US was “temporarily” suspending the convertibility of the dollar into gold.
Fifty-five years later, still temporary.
The slow bleed
With the anchor cut, there’s no limit on how many units of currency can be created. And governments create them. 2001, 2008, COVID. In just 18 months during the pandemic, the US printed roughly 40% of all dollars in existence.
A 1971 dollar is worth about seven cents today. Someone who saved diligently through the seventies, did everything right, and left it in the bank lost more than 90% of their purchasing power. Not because they made a mistake, because the rules changed and nobody told them.
This is the bit worth sitting with: inflation isn’t prices going up. It’s your money going down. New money dilutes the money you already hold, exactly like a company issuing a billion new shares.
And it moves wealth in one direction, from savers to borrowers, from cash-holders to asset-owners. If you own property, shares or gold, inflation lifts your net worth. If you’re earning a wage and saving in cash, it quietly eats you alive.
South Africans know this rhythm well. Ask anyone what R1 000 bought in 2005.
Now watch what the sceptics are doing
For decades, central bankers dismissed gold as a “barbarous relic.” A pet rock. Outdated.
In 2025, central banks bought over 1 000 tonnes of it, the latest in a run of record years. Poland, China, Brazil, Turkey, India, Kazakhstan. Emerging markets especially.
Three reasons, according to Prehn:
1. De-dollarisation. Gold doesn’t have a foreign policy. It won’t invade you, and nobody else can print it.
2. Sanctions risk. After Russia invaded Ukraine in 2022, roughly $300 billion of its reserves were frozen. Every other country did the maths: metal in your own vault can’t be switched off with a button.
3. Debt. US federal debt is approaching $40 trillion, adding about a trillion every hundred days. Central bankers can read a chart. They’re hedging.
When the People’s Bank of China, JP Morgan and ordinary retail buyers all end up on the same side of a trade, it’s worth asking why.
The honest caveats
Gold isn’t magic, and this isn’t a reason to move everything into metal.
• Cash still has a job, emergencies, short-term needs. It just isn’t “safe” over a decade.
• It produces no income. Physical gold needs to be stored and insured.
• Not all gold is the same. Physical coins and bars, ETFs, mining shares and futures are completely different instruments with completely different risks. An ETF gives you exposure without storage, but you’re trusting an institution rather than holding the metal.
• Allocation matters more than conviction. Sovereign wealth funds and family offices typically sit somewhere around 5–15%. Not zero. Not 90%.
The takeaway
Prehn’s closing line is the one worth keeping: gold is a 5 000-year-old lie detector for governments. It doesn’t care about politics, elections or press conferences. It just sits there being patient.
When gold rises, it’s telling you that trust in the system is slipping somewhere.
You can ignore that signal, or you can understand it.
This article summarises “If You Don’t Understand Gold, You Don’t Understand Money” by Felix Prehn (Felix & Friends / Goat Academy, published April 2026). It is general information, not financial advice. Speak to a licensed financial adviser about your own circumstances.
