If you are looking at investing in gold for the first time, then it is good that you doing your research as to why it is better than cash.
Here Are Reasons Why Gold Is Better Than Cash
Gold has long been considered a safe haven asset, a store of value that holds its worth over time. In contrast, cash is vulnerable to inflation and can lose its buying power over time.
In this blog post, we will explore why gold is a better option than cash for preserving wealth and achieving financial stability. From its long-term value to its ability to hedge against inflation and currency fluctuations, we will examine the many benefits of investing in gold.
So, whether you’re a seasoned investor or just starting to explore your options, read on to discover why gold is the smart choice for preserving your wealth.
Ways Gold Is Better Than Cash
Gold Is Not A Fiat Currency
Gold has been considered a store of value for centuries, and for good reason. In contrast to cash, which is vulnerable to inflation and can lose its buying power over time, gold has a number of benefits that make it a better investment option. Here are just a few reasons why gold is better than cash:
Gold is a hedge against inflation: As the cost of goods and services rise, the purchasing power of cash decreases. Gold, on the other hand, tends to increase in value during times of inflation, making it a great way to preserve purchasing power.
Gold is a hedge against currency fluctuations: The value of cash is closely tied to the value of the currency it is issued in. If the value of the currency drops, so does the value of the cash. Gold, however, is not tied to any particular currency, making it a safer investment in uncertain economic times.
Gold has a long-term value: Cash is a short-term investment, as it can be easily spent or lost. Gold, on the other hand, has been a store of value for centuries and has consistently held its value over long periods of time.
Gold is a tangible asset: Cash is just a piece of paper, gold is a physical asset that can be held and stored, giving it an added level of security.
Gold is a universally accepted form of wealth: Cash is only accepted in the country it is issued in, gold is accepted worldwide, making it a more versatile investment.
In short, gold is a better investment than cash because it is a hedge against inflation, currency fluctuations and has long-term value. It’s also a tangible asset and universally accepted form of wealth. If you’re looking to preserve your wealth and achieve financial stability, consider investing in gold as it may be a better option than cash.
Gold Has Always Been Going Up In Value
Gold has a long history of maintaining its value over time. The price of gold has increased steadily since the 1970s, and it has been considered a safe haven asset, a store of value that holds its worth over time.
For example, in 1971, the price of gold was around $35 per ounce, by 1980, the price had soared to $850 per ounce, an increase of over 2,000%. Similarly, in 2001, the price of gold was around $250 per ounce, and by 2011, it had reached $1,800 per ounce, an increase of over 600%.
More recently, in 2020, the price of gold reached an all-time high of $2,070 per ounce, an increase of more than 20% compared to the average price in 2019. The reason for these price increases is due to the fact that gold is a hedge against inflation and currency fluctuations, as well as being a safe haven asset during times of economic uncertainty.
A graph of the gold price over time would show a general upward trend, with occasional dips, but overall, it demonstrates a consistent increase in value. It’s worth noting that the price of gold can fluctuate in the short-term, but over the long-term, it has consistently demonstrated its value as a store of wealth.
We have written a great article here on 8 Reasons why gold goes up in value here.
Gold Is Stable
Gold is considered a stable asset because it has several properties that make it a reliable store of value:
Limited Supply: The amount of gold that can be mined is limited, which helps to maintain its value over time.
Durability: Gold is a durable metal that does not corrode, providing a sustainable store of value.
Inflation Hedge: Historically, the price of gold has increased during times of inflation, which makes it a good investment option to preserve purchasing power.
Currency fluctuations: Gold is not tied to any particular currency, which makes it a safer investment option in uncertain economic times.
Universally accepted: Gold has been widely accepted as a store of value and a medium of exchange across cultures and civilizations for centuries, making it a universally accepted form of wealth.
Liquidity: Gold is easy to convert into cash, making it a liquid asset that can be easily bought and sold.
Gold Is Used As A Currency in Most Countries In The World
Gold has been used as a form of currency in many countries throughout history. The use of gold as a currency can take different forms, but the most common ways are:
Gold Coins: Gold coins have been used as a medium of exchange for goods and services in many cultures and civilizations throughout history. They have been minted by governments and private entities, and they have been used as a store of value and as a means of payment.
Gold Bars: Gold bars have also been used as a form of currency, particularly in countries with a history of gold mining. They can be traded, stored and used as a medium of exchange, and they are often used for larger transactions such as investment and trade.
Gold Certificates: Gold certificates are paper documents that represent ownership of a specific amount of gold, usually stored in a bank or other secure location. They can be exchanged for cash or physical gold, and they have been used as a form of currency, particularly in the past when gold was used as a backing for paper money.
Gold-Backed Currencies: Some countries have had their currencies backed by gold, meaning that the government guarantees that the currency can be exchanged for a certain amount of gold. This was the case of the gold standard, which was adopted by many countries in the 19th and 20th centuries, and it meant that the value of the currency was directly tied to the value of gold.
Physical Investment
Gold is a physical investment, meaning it is a tangible asset that can be held and stored, while digital currencies, like Bitcoin, are digital assets that are stored electronically and traded on digital platforms.
Tangibility: One of the main differences between gold and digital currencies is that gold is a tangible asset, meaning it is something that can be held and stored physically. This gives gold an added level of security because it can be stored in a safe place or a bank vault, and it can be easily verified. Digital currencies, on the other hand, are stored electronically, and they are vulnerable to cyber-attacks and hacking, which can result in the loss of the investment.
Limited Supply: Gold is a finite resource, and the amount of gold that can be mined is limited. This scarcity helps to maintain the value of gold over time. Digital currencies, on the other hand, can be created or “mined” through the use of computer power, and the supply can be increased, which can lead to fluctuations in the value.
Acceptance: Gold has been widely accepted as a store of value and a medium of exchange across cultures and civilizations for centuries, making it a universally accepted form of wealth. Digital currencies are still relatively new and are not yet widely accepted, which can make them more difficult to use in everyday transactions.
Durability: Gold is a durable metal that does not corrode, providing a sustainable store of value. Digital currencies are stored electronically, and they are vulnerable to cyber attacks, hacking and technical issues which can result in the loss of the investment.
Counterparty Risk
Counterparty risk refers to the risk that the other party in a financial transaction will not be able to fulfill their end of the bargain. With gold, this risk is minimal because it is a physical asset that can be held and stored, and its value does not rely on the ability of a third party to fulfill their obligations.
Gold Is Liquid
Gold is considered a liquid asset because it is easy to convert into cash, making it a liquid asset that can be easily bought and sold.
Liquidity: Gold can be easily bought and sold on various markets including the London Bullion Market Association (LBMA), the COMEX in New York, and the Shanghai Gold Exchange. This means that it can be easily converted into cash, making it a liquid asset.
Universally accepted: Gold has been widely accepted as a store of value and a medium of exchange across cultures and civilizations for centuries, making it a universally accepted form of wealth. This means that gold can be easily traded and exchanged for cash in different countries and cultures.
Market depth: Gold has a deep and active market, with many buyers and sellers, which makes it easy to find a buyer or seller for gold at any time. This ensures that gold can be easily bought and sold, and that it can be converted into cash quickly.
Low storage costs: Gold can be stored relatively inexpensively, and it doesn’t need to be moved frequently, which means that it can be held for long periods of time without incurring high storage costs.
Low transaction costs: Gold is a tangible asset and the transaction costs of buying and selling gold are relatively low compared to other assets.
In summary, gold is considered a liquid asset because it can be easily bought and sold on various markets, is universally accepted, has a deep and active market, low storage costs, and low transaction costs. All these factors make gold a liquid asset, which means it can be easily converted into cash.
Protect Your Portfolio In A Crisis
Gold has traditionally been considered a safe haven asset, which means that it can help protect a portfolio during times of economic crisis.
Hedge against inflation: In times of economic crisis, inflation can rise, and the value of cash can decrease as the purchasing power is eroded. Gold, on the other hand, tends to increase in value during times of inflation, making it a great way to preserve purchasing power.
Hedge against currency fluctuations: Economic crisis can lead to currency fluctuations and devaluation. When this happens, the value of cash is closely tied to the value of the currency it is issued in, so if the value of the currency drops, so does the value of the cash. Gold, however, is not tied to any particular currency, making it a safer investment in uncertain economic times.
Long-term value: Cash is a short-term investment, as it can be easily spent or lost. Gold, on the other hand, has been a store of value for centuries and has consistently held its value over long periods of time.
Liquidity: Gold is a liquid asset and it can be easily bought and sold, this allows for flexibility when managing the portfolio during a crisis.
Diversification: Adding gold to a portfolio provides diversification and can help balance out the portfolio during a crisis, as gold has a low correlation to other asset classes such as stocks and bonds.
In contrast, cash can be more vulnerable in a crisis, as it is subject to inflation and currency fluctuations, it can lose its value over time, and it can be difficult to convert into other assets quickly.