Saving in Gold Vs. Investing in Gold
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There are multiple ways of holding gold as an optimal percentage in your asset portfolio. It largely depends on how you view the gold you own.
Some see it as an investment if you’re expecting it to accrue profits in currency terms as a return on investment. The idea is to buy it at a lower price and sell it higher to benefit from the re-sale.
However, economists have argued against this idea of trading gold to accumulate a wealth of fiat paper currency when it’s primarily owned as a hedge against depreciation. Thus, investing in gold for selling at a later date, defeats the idea that fiat currency is susceptible to failure. After all, it’s worth reading about President Nixon’s decision for the gold-exchange standard that restricted the convertibility of the US dollar into gold.
Other ways of owning gold involve saving it as a form of wealth preservation. Here’s more about saving and investing in gold.
Saving in Gold
Savers of wealth have turned towards this precious metal as a reliable form of savings for centuries. Generational stores of wealth have for long been preserved as gold by European aristocrats, the elites, the Middle East oil barons, and even central banks.
This highlights the functionality of this metal as a long-term store of wealth which has little to do with the returns it can bring in monetary terms. Gold is theoretically a form of money that’s beyond the control of central banks. Therefore, the monetary policy can’t govern its supply, or curtail its circulation, as it would with fiat money.
Systemic collapses have threatened savers to look for more reliable ways of protecting their lifelong savings. Thus, owning gold is the ultimate way to preserving wealth for survival. And since gold cements your savings over time, you don’t have to worry about fiat denominations that peg gold prices in the market.
Gold as Wealth
Chasing paper profits always puts you in a position of disadvantage because you never have the financial security you so crave. You might not realize but family providers usually need sustainability more than profit-seeking.
Storing your savings in the form of wealth also allows you to pass it down to coming generations. You might have a huge bank balance that you can cash any day but having paper money offers little security.
The last century has seen some of the world’s fiat paper currencies losing 99% or more of their value. This year, more than 80% of the 143 currencies reviewed have depreciated in value. With your wealth locked and secured in gold, you can skip reading news stories about staggering inflation rates and exchange rates.
Investing in Gold
If you want to expand your investment portfolio, gold can be an invaluable asset (both in literal and metaphorical terms). Adding gold to your portfolio can lower the portfolio risk.
Many studies have validated the use of gold as a risk-reducing asset. In fact, the optimal allocation of gold in multi-asset portfolios is found to be 5-20%.
In either way, gold can be an invaluable asset to you and your family, in times to come.