From Gold to Beer: Oktoberfest's Tale of Inflation and Investment Resilience

The global economy is continuously impacted by inflation, leading to fluctuating prices in various sectors. The annual Oktoberfest, an iconic event for beer enthusiasts, is no exception. While beer prices soar, it’s interesting to note how gold, a traditional investment, has played a role in cushioning the effects of inflation for some.

Impact of Inflation on Oktoberfest

The renowned investment company, Incrementum AG, highlighted the ripple effect of inflation reaching Oktoberfest. This year, the cost of a litre of beer (Maß) surged by 8 percent, landing at 14.9 euros. This hike dampened the festive spirit to some extent. In 2022, the hike in beer prices from its 2019 rate was substantial, resulting in a 25 percent dip in beer consumption. It’s worth mentioning that Oktoberfest was called off in 2020 and 2021 due to the COVID-19 pandemic.

Historical Uprisings over Beer Prices

Surprisingly, beer prices have stirred public sentiment in the past. Rewinding to 1844, a mere increase in beer prices from 5 kroitzers to 6.5 kroitzers sparked street riots. The military, instead of suppressing the protesters, expressed solidarity with them. This unprecedented reaction compelled King Ludwig I to roll back the prices.

Gold vs. Beer: An Unusual Comparison

For those who diversified their investments into gold, Oktoberfest didn’t pinch the pocket as much. The price ascent of gold in terms of euros offset the beer price surge. To put it in perspective, an ounce of gold could fetch 119 litres of beer this year at Oktoberfest, just a litre short from last year’s 120. In comparison to 2019, an ounce of gold could get you an additional 4 litre of beer.

The price ratio of gold to Oktoberfest beer (how many litres of beer you can get for one ounce of gold). Source: Incrementum AG.

Paper Money’s Diminishing Power

For individuals who retained their savings in euros, the story was different. They received over a quarter less beer compared to 2019, marking a 26.3 percent hike in price. Instead of a full glass, they had to be content with three-quarters of a glass for the same amount. This scenario underscores the eroding purchasing power of paper money due to inflation.

Gold’s Historical Track Record

Gold has been a reliable hedge for beer aficionados over the years. While there have been periods where the beer’s price, when equated to gold, has increased, it has largely remained stable since 1950. For instance, in 1950, an ounce of gold could buy 91 litres of beer. This number surged to 227 litres in 1980. However, in 2002, this figure dropped to 47 litres per ounce. The average over the past 73 years stands at 89 litres per ounce. Contrarily, when assessing the price change in euros, it has rocketed 18 times from 0.82 euros in 1950 to the current 14.9 euros.

Inflation remains an ever-present force, influencing the cost of goods and services. Events like Oktoberfest provide a tangible measure of its effects. While beer prices have been subject to inflation, gold has remained a stable investment, offering a buffer against rising costs. As history and numbers suggest, diversifying investments and understanding market dynamics can provide a shield against the eroding power of inflation.