June 25, 2024

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THE PROS AND CONS OF HOLDING CASH VS GOLD

Cash or Gold: Could One Asset Prove Better? | U.S. Money Reserve

It is like playing a Monopoly game when it comes to investing gold or deciding to save money. But having cash reserves helps, while gold is your safe haven that also serves as savings for hard times. But the fact remains that you can hold your money in both cash and gold. But why would we say this? 

It is intrinsically valued when you buy gold from gold buyers/dealers. This is because the precious metal protects your investment portfolio against uncertain economic times. In addition, with the properties as a scarce commodity, you can use gold in art and technology, making it a good portfolio stabilizer. 

Furthermore, gold can use as a medium of exchange as it has helped facilitate commerce for centuries. For example, if you are in trouble, you can sell gold jewellery to gold buyers in a matter of minutes. Another thing about gold is that you can make it into smaller units compared to dividing currency. 

Hence, it is divisible, making it a powerful medium of exchange. But on the other hand, gold is durable when looking at bullion. Moreover, it can survive natural disasters as it does not corrode. Still, it is scarce as it is costly to find and produce the precious metal into finished products. 

Lastly, gold performs exceptionally during economic times when there is a downturn or a financial crisis. At the time, gold prices tended to rose, making it a great choice to get cash for gold if needed. So, gold is your inflation hedge that reduces volatility in your investment portfolio, and yes, it is a diversifier. 

So, when stocks decline, you see the spot price of gold tending to help mitigate your losses. Yet, cash remains king and hanging on to a fair amount of currency helps. Compared with gold, money is also durable in digital form, and you can transfer it in trade. 

Cash remains low risk, and you can accrue interest when not spending it. So yes, the returns are low than looking at investing in stocks, but it helps manage inflation. In challenging economic times, you see investors increasing allocations towards cash to help minimize the risk of volatile stocks as the cash value does not fluctuate in the short term. 

Still, other investors prefer holding alternative assets like gold in these scenarios. Furthermore, cash is also a liquid asset to convert and maintains a market value. But the most significant risk of cash is holding too much of it. 

The reason is that it is not a scarce asset compared to gold. However, with too much money in circulation, the value withers away due to inflation. Neither is money backed by anything as it is not a tangible asset but relies on fiscal and monetary policies. 

This is not the case with gold bullion; the same applies to owning gold jewellery. If needed, you can always sell gold jewellery for fast cash at a gold dealer. Furthermore, money has intrinsic value as it has no physical commodity backing like gold. 

Still, why should you invest in both? When you have the cash, it gives you access for the short-term if needed. So having emergency savings is essential but not too much as you do not want too much tied up in one entity. 

Hence, if you are lucky to have loads of money, diversify your cash in your saving account, investing some of it in gold to protect your long-term value. The fact remains that gold still stands the test of time, remaining a durable asset.