In today’s Exponential Investor:

  • How much gold will it take to get you the latest iPhone?
  • The pound’s at its weakest since the 1980s
  • Yet gold in pounds is up

A new iPhone was released this week.

Apparently, this is a huge deal.

It was all my foolhardy Apple-loving friends could talk about at brunch on Sunday, with two of them planning to drop the near thousand pounds required to nab the iPhone 14 Pro.

Not me. I’m a hardened Android user. After smashing the glass backing on my iPhone 4 only three months into owning it, I realised this premium – yet fragile – product would not survive me.

So I gave up on its seamless connection to other Apple products, and the extremely easy-to-use interface, for something more robust. Smash proof, waterproof, Shae proof.

Have I regretted my decision? Absolutely not. My Samsung and its rugged case can be accidentally dropped and kicked and still be in crack-free, operating order.

My Samsung has fallen out of my pocket while skateboarding and bike riding, and has been dropped in mud while out four-wheel driving. The dog gnawed on it once and, following a quick rinse under the tap, it was perfectly drool free.

Take that, Apple users.

Signing up to Android means my phone thrives with my clumsy self.

The only problem is that it’s not cool.

No one sleeps out of the front of Samsung stores to get their hands on the latest model. A Samsung ad will never be as slick as anything the marketing team at Apple produces.

But, perhaps most importantly, no one will ever care how many grams of gold it takes to buy a Samsung.

iPhone costs more dollars… but less gold

It’s not even out yet, but there’s a new way to decide whether Apple’s latest gadget costs too much.

Incrementum, the authors behind the annual “In Gold We Trust” report, has created the very clever “iPhone/Gold ratio”.

Since 2007, Incrementum has tracked how many grams of gold it would take to buy the latest iPhone model.

Every time a new model is released, it’s considered significantly more expensive than the previous one.

Which begs the question: if the price of the highest model iPhone has risen from USD$599 to USD$1499 in 15 years – i.e. a whopping 150% – does it take more and more gold to buy each time?

No, says Incrementum.

According to its numbers, “Gold investors, on the other hand, have no reason to lament. In 2007, they had to 0.92 ounces of gold for the very first iPhone. Fifteen years later, a slightly lower amount of 0.87 ounces of gold is due for the iPhone 14 Pro. Compared to the previous year’s price of 0.86 ounces, the price remained almost unchanged.”  

In fact, I’d argue you’re handing over less gold for more phone.

There have been incredible leaps in technology in the past 15 years. From size to processing speed, to more memory, longer battery life and overall function.

The iPhone has morphed from being a phone in your pocket to a mini computer you can work from.

And you’re getting all this whiz-bang technology for slightly less gold than it took 15 years ago.

What does this tell us?

That gold is doing what it’s meant to do. Protecting your purchasing power.

Long-term wealth protection

It’s a funny thing to think that a metal as old as commerce itself can be used to measure the worth of the latest phone.

And, more to the point, that despite gold’s price volatility, it takes less gold today to buy a device that consistently delivers more as it’s upgraded.  

However, this is exactly what gold does. You’re not meant to get caught in the daily movements of the metal, that’s not its purpose.

Having exposure to physical gold is about protecting your capital over long periods of time. The iPhone is a good example of how gold holds its purchasing power in the long run.

For example, since early August, the pound is down 4% against the euro and 5% against the US dollar and the Swiss franc. The pound sterling is the weakest it has been since the 1980s, and may be at parity with the US dollar at some point this year if this currency slide continues.

Yet if you measure the pound against gold, it’s up. Around the same time the pound began to decline in value compared to other major currencies, in sterling it was up 2.44%.

So, even though the pound fell in value, if you’d opted to move some of your pounds into gold, you would have been able to offset some of that decline.  

Perhaps a weak sterling is creating an opportunity for you. Rather than buy the latest iPhone, put that money into gold.

Then, if the sterling does go to parity with the US dollar, you’ve protected your capital in the short term.

Until next time,

Shae Russell
Co-editor, Exponential Investor