When it comes to investments, especially during turbulent economic times, it’s crucial to consider the best vehicle for storing wealth. With currencies losing value and interest rates plummeting, the decision between holding onto cash or gold becomes more significant. Let’s explore the benefits and disadvantages of each. When the gold price is high, it could be a good time for you to sell bullion and take advantage before the next drop.
Benefits of Holding Cash
Flexibility
Cash offers immediate liquidity and flexibility. It’s an asset that’s readily available, necessary for day-to-day expenses, and can be used to take advantage of financial opportunities as they arise.
Familiarity
Cash is a universally recognized medium of exchange. For centuries, people have used different currencies to trade, making cash a familiar and necessary part of life. In contrast, gold, while valuable, requires a certain level of understanding to buy and sell effectively, particularly when dealing with gold bullion, bars, or coins.
Disadvantages of Holding Cash
Limited Ownership
What many people don’t realize is that when you deposit cash into a bank, you essentially relinquish sole ownership of that money. Governments have the authority to divert funds from bank accounts, as seen in Cyprus, where the government redirected money from citizens’ accounts to manage debt. In the U.S., the Internal Revenue Service (IRS) is known to divert funds from individuals who deposit $10,000 or more.
Devaluation Risk
Holding cash doesn’t necessarily safeguard wealth. Central banks can devalue currency by printing more money, a risk that doesn’t apply to gold. Since the abandonment of the gold standard, the U.S. dollar’s purchasing power has decreased by 85%, whereas gold has significantly increased in value over the last century. Currently, gold is hovering between $2,450 and $2,500 per ounce, with analysts predicting it could reach $3,000 by the end of the year.
Benefits of Holding Gold
Store of Wealth
Gold is a far more efficient store of wealth than fiat currencies, particularly in low-interest-rate environments. Money in the bank may lose value due to inflation, whereas gold has maintained its value for over 5,000 years, outlasting paper currencies that have only existed for about 45 years.
Global Value Consistency
Gold’s value is consistent worldwide, independent of any single country’s currency. For instance, if the spot price of gold is $1,450 per ounce in the U.S., it will be the same globally. While gold buyers may set specific prices for the gold being sold to them, these prices are always based on the global spot price. Don’t waste time trying to bargain a dealer for a higher price. When you are looking to sell bullion, simply watch the market and wait for the right time to sell.
