When it comes to investments, it’s essential to consider the best vehicle for storing wealth, especially during turbulent economic times where currencies lose value and interest rates plummet. What are the benefits and disadvantages of holding onto either gold or cash?
Benefits of Holding Cash
Increasing your investments or protecting your cash during volatile markets is prudent. Seasoned investors prefer to limit their economic exposure by keeping reserves of both cash and gold.
Flexibility
Cash in hand is important due to its flexibility. It is a readily available asset that you need for everyday life. Cash also allows you to take advantage of financial opportunities as they arise.
Familiarity
Everyone is familiar with cash. For centuries, different currencies have been used for trade. Cash is a necessity, and how you spend, save, and replenish it matters. Gold, on the other hand, is not as common or familiar. Investing in gold requires understanding how to buy and sell gold bullion, whether in bars or coins.
Disadvantages of Holding Cash
New gold buyers need to understand the importance of buying gold and holding onto it more than cash.
When you deposit cash into your bank account, you cease to be its sole owner. Governments can intervene and divert your money from the banking system. For example, in Cyprus, the government diverted money from ordinary citizens’ accounts to save itself from debt. The Internal Revenue Service (IRS) in the U.S. is known for diverting funds from individuals who make deposits of $10,000 or more.
Having cash won’t necessarily make you wealthy or safe because central banks may devalue a currency by printing more physical currency. This does not happen with gold. Since the abandonment of the gold standard, the purchasing power of the U.S. Dollar has decreased by 85%. In contrast, gold has gained significant value over the last century. Currently, gold is hovering between $1,450 and $1,500 per ounce. Analysts predict that it could reach $1,700 by the end of the year.
Benefits of Holding Gold
Most gold investors understand the profit potential that gold offers. When it comes to protecting wealth, gold is far better than any fiat currency.
Gold is a more efficient store of wealth than fiat currencies. With low-interest rates, money in the bank does not mean as much, especially when accounting for inflation, which causes currencies to lose value. Paper-based currencies have only been around for 45 years, but gold has maintained its value for over 5,000 years.
You can sell gold bullion bars or coins at any point to get the cash you need for everyday transactions. Gold is always a sure thing. Its value is consistent globally. The price of gold is not tied to the currency value of the country where it is sold. If the spot price is $1,450 per ounce in the U.S., it is the same everywhere else in the world. Gold buyers set the price for gold based on that global spot price.
