Here we explore an age-old debate of cash versus gold, the benefits/disadvantages of cash and why we conclude that gold is better than cash in the bank!
Note: when we refer to cash, we are meaning cash in both a physical form as well as cash held in a bank account, which can readily be withdrawn.
Benefits of cash
We start our discussions with the benefits of cash, because clearly there are many which we have listed below:
- Familiar – as a type of investment cash is familiar to everybody. Cash can readily be traded for goods and services as required
- Highly liquid – a major benefit of cash is that it is highly liquid. In times of need, the cash owner can use this for whatever purposes they require
- No counterparty risk – holding physical cash has no counterparty risk. Cash in the bank has the risk (albeit small) of the banking collapse and forfeiture/freezing by government authorities
Disadvantages of cash
There are many disadvantages of cash as a form of investment, we go on to discuss just some of these below:
- Destructible – cash in a physical form is destructible, notes will burn for example
- Devaluation – cash could literally become worth a reduced amount through an overnight currency devaluation by the issuing government
- Fraud – cash can be fraudulently copied and may cause the owner to have worthless paper (when stored physically)
- Inflation – as inflation rises the value of cash declines, in times of rampant inflation an investment nest egg can seriously deteriorate
- Local use only – most currencies can only be used locally, for global use they need to be converted, which usually attracts an exchange rate conversion fee
- No capital gains opportunity – there is literally no capital gains to be made from cash (other than perhaps in an economy in deflation, which is rare)
- Theft/loss – physical cash could be stolen or lost. Cash in a bank account could be stolen through fraud and/or bank employee misconduct
Why invest in gold rather than keep the cash?
When looking through the above list of benefits and disadvantages of cash one conclusion can be drawn,
physical gold has all the benefits and most of the disadvantages can be mitigated against. Gold has well and truly stood the test of time and has been used as a method of exchange in trade for 5,000+ years.
Analysing the benefits of cash, we can also say that physical gold is familiar in both coin and bullion formats, is also highly liquid and has no counterparty risk.
Looking at the disadvantages of cash it is clear that physical gold doesn’t have these disadvantages in common. Physical gold is virtually indestructible, and it can’t be devalued by the whim or economic needs of a government. Physical gold stored by the owner isn’t subject to fraud and generally (looking at history) as inflation rises so does the price of gold, which is renowned as an investment product to use to hedge against inflation.
Gold investment as part of a balanced investment portfolio
Gold is the same worldwide, there is no need to convert at a cost into a local currency. Unlike with cash, there is a chance of capital gains with gold, historically gold prices have performed well. Physical gold could be at risk of theft, so the owner does need to make sure that strong security is in place, sometimes this could be through third-party storage, which needs to be investigated carefully to reduce counterparty risk.
Convert cash into gold now
Call 020 7060 9992 and speak to Physical Gold now about your requirements and we can advise on the best approach for you. We can advise on strategies of how to best convert your paper wealth into physical gold and in doing so realise the benefits previously described. If you prefer to, email us now at https://www.physicalgold.com/contact/ for an early reply and to start discussions.