Sunday, September 8th 2024
Money has main values: to provide a way to store value so we can accumulate wealth and to make trade easier via giving a medium of value. Because of this role, cash is important to all of us. It also means that cash savings is important to us. Cash is easy to access and is the most widely accepted method of paying. Now that we have digital payments via credit cards or electronic transfers, it is even easier to use paper money.
Another important savings platform is gold. Gold in the form of coins and bars has a big advantage over cash when it comes to saving your money. Today we are going to take a look at the various ways that gold holds an advantage over paper savings. This is good to know for investors considering opening a precious metal IRA account with any legit gold-IRA company.
Gold is Limited
Paper money is easy to produce and that can be dangerous. Governments can print as much as they want and that can debase the currency. On the other hand, gold is limited, there is only so much of it in the earth and we cannot produce new gold artificially.
Gold retains its value well simply for the fact that it cannot be mass produced, there is only a limited amount of it in the world.
Gold’s value is also not connected to a central government. The value is dictated by the supply and demand of gold. This supply and demand stems from investors but there is another source of supply and demand. Gold is used by a number of industries that use it.
When it comes to printing paper money, that value is assigned by the printer, not by the item itself. The printer can print anything from $1 to a note that claims to be worth 100 trillion. Yes, Zimbabwe does have a trillion bill.
A lot of governments and people think that paper money is just a bottomless supply. They can print some when they need to and it is cheap to do so. The value of that money can be changed at a whim or from outside factors though.
Paper money’s value is nothing when it is compared to that of gold in all its forms. Gold holds its value well and if you want to store your wealth it makes for a great option.
An International Value
When it comes to an international currency, none really exists. Some would argue that the US dollar is as close as that exists because we have all heard of it. Some may argue that the Euro is the closest thing because it is used in multiple countries across the European Union. No matter what currency you argue is closest to an international currency, it is still not international.
If you take that money to another country, it won’t have a value. You will need to convert it to their currency. This is because the countries have decreed that their individual currencies are what holds value in their country.
If something happens to the government that controls a currency, that currency is then at risk. Along with the currency, your wealth/savings is also now at risk.
The value of gold is different. Gold is found in the earth and has a limited supply. No government issues, makes, or prints gold. Gold is a precious metal and the value of it is recognized around the world. Even if you have a gold coin stamped by one country, the value of that gold is still recognized by another.
Gold Does Not Have A Credit Risk
When you put your paper money into a savings account with a bank or financial institution you are storing it with them. Kind of. The bank only is required to store 10% of the deposits that are made with them. The rest of the deposits are used to fund loans that are offered to other customers. That means there are not large amounts of money in the vaults of banks.
Because the bank is not required to store all of your money, this creates two distinct problems:
- You create extra cash in the market because while the bank holds it, the person that the money is lent to also holds that same money. In effect that cash is in two places at once.
- Second, that money that you have stored there is up to the bank to protect. When they lend your money out, along with that of others, the decision they make can come with a lot of problems.
- While the Federal Reserve does have some protections for the balance of your account up to a certain amount and to prevent bank runs, your cash is still at risk.
When you invest in gold or other precious metals that money is not then lent back out to someone. The precious metals are stored in a vault at a regulated depository. Banking executives have no control over your investments.
In the end, gold retains its value far better than cash savings. Not only that it is less risky and more widely recognized for its value. No institution has control over your money when you invest into precious metals. You are the one who is in control and you know you are in control of a REAL item.