18 November 2022

Gold vs Cash: How Should You Save Your Wealth?


When it comes to securing your financial future, the debate between gold vs cash is a prominent one. When it comes to securing your financial future, the debate between gold vs cash savings is a prominent one. Both have their merits and pitfalls and understanding these can significantly impact your wealth preservation strategy. The decision of where to put your money—whether in gold or cash—can have long-lasting effects on your financial security. In this comprehensive guide, we’ll explore the advantages and disadvantages of holding gold versus cash, helping you make an informed decision on how to save your wealth.

You see, In times of economic uncertainty, currency value drops because people flock toward safer investments. By Investments, we mean assets that hold the actual value. Unlike paper money, which is just your nation’s central bank’s guarantee. 

So naturally, investors will put their money into assets that don’t depreciate. Gold is a good example of this move. But with that being said, is it really worth replacing actual cash with a precious metal like Gold

In this blog post, we’ll examine each financial instrument to help you determine the best way to secure your wealth in uncertain times. Brace yourself!

Reasons why you should hold Gold

Beyond its shiny exterior, gold holds a lot of financial promise. Firstly, it never depreciates in times of economic uncertainty. Secondly, it is a strong hedge against inflation and more! Let’s discuss these aspects in a little more detail. 

     1. Gold holds an intrinsic value

Gold vs Cash, financial security, investment strategy, wealth saving options

Gold is an asset that protects an investment portfolio against negative economic events. For example, if you’ve invested your money into stocks or crypto, you can be certain of their volatility. 

Gold on the other hand is a stabilizing asset. Due to its scarcity, It’s considered valuable, is recognized as an ancient form of savings and wealth, is used in the fields of health, art and technology and billions of people wear it as ornaments. 

That’s why billionaires like Ray Dalio have made it a point to include Gold investments in their portfolios so that if other assets see a drop in value, Gold can act as a protector. 

     2. Gold is a medium of exchange

Stacks of gold coins next to a piggy bank filled with cash, symbolizing the choice between gold and cash for wealth preservation.

Gold has been used as money for at least 6,000 years!

This is due to its distinctive and durable nature. This characteristic of Gold has ensured gold to remain a good medium of exchange since ancient times. 

Furthermore, due to its intrinsic nature, Gold is easier to trade and is a readily saleable asset due to its high demand. 

     3. Gold is infinitely Durable

Image showing a hand holding a stack of gold bars.

Gold is a durable item that can survive natural disasters and withstand decay. It can stand the test of time which is why it was the primary form of currency for thousands of years. 

In its purest form, the metal doesn’t rust, ensuring its value is bound to stay on the high side. Hence, ancient Gold coins discovered in 2022 can be retrieved in pristine condition thanks to their durable nature. 

     4. Gold is a scarce commodity

Image of raw gold for infinity durability.

Gold is difficult to find and convert as a precious metal to finished products. There’s also the fact that there’s a finite amount of precious metal deposited on earth. This causes Gold’s value to keep rising due to a low volume of circulation. 

     5. Gold performs well during uncertain economic periods

Gold prices tend to go up in periods of financial crisis or economic downturns. When such circumstances arise, companies fail to reach their revenue targets. This often negatively affects their stock price. 

Gold however retains its intrinsic value and preserves your purchasing power even in times of sheer uncertainty or even economic collapse. 

     6. Excellent inflation hedge

Financial expert analyzing investment charts with gold coins and cash, highlighting investment strategy options.

When interest rates are low, consumption increases leading to inflation in an economy. Central banks often lower or hike interest rates in a bid to boost spending in an economy. Since this is a normal measure, it can happen frequently causing money to lose its value. 

However, Gold acts as an inflation hedge and brings stability to the economy. It reduces market volatility and actually saves your investment portfolio from further damage.

     7. Gold is an effective portfolio diversifier

Gold can help you diversify your investment portfolio because it has a low connection to other conventional assets like Bonds, Stocks and Crypto. Therefore, when assets such as stocks decline in value, the gold price rises to manage the losses to your portfolio.

This is why Ray Dalio in his all-weather portfolio strategy actually maintains 7.5% Gold in his investment portfolio to continue its growth even in poor economic times. 

Reasons to hold cash

In the world of finance, there’s a common saying that goes like “cash is king.” This is despite the popularity of credit cards and other cashless alternatives. Holding cash can also be a good idea. 

Just when the economy is doing well. Many investors hold cash when stock prices are high and they want to avoid paying premium prices. 

Another reason for investors to hold cash is to endure stock market volatility. But that’s just the tip of the iceberg. Cash also has its upsides. Let’s check them out below.

     1. Cash is stable

People trading gold and cash at a financial market, showcasing the liquidity and exchangeability of both assets.

Cash is a very stable asset, especially when held in powerful currencies like Dollars, AEDs, Euros and more. 

It can also be kept as a bank deposit and monitored via ledgers and bank accounts. Moreover, users can also transfer and trade the cash in their possession anytime they want. Furthermore, It can be kept in a storage facility as well. (Although its durability isn’t guaranteed over long time frames.)

     2. Cash carries low risk

Emergency fund consisting of cash and gold, illustrating financial preparedness in uncertain times.

When you hold cash in a bank, it can enable you to gain interest. But, the returns are much lower than if you compared them with the stock market or if you kept your money in Gold. 

That said, holding money is a decent option to save your wealth but just not as profitable as other assets. 

     1. Cash is a highly liquid asset

Emergency fund consisting of cash and gold, illustrating financial preparedness in uncertain times.

Cash is a liquid asset which means it can be readily exchanged for other tangible items and services. This ability allows investors to hold and release their cash at will. You can choose to deposit or withdraw it from the bank anytime. You can also use it as a form of exchange to buy goods or services.

Additionally, investors can use cash to invest in other asset classes when the market is favorable. This can be when the current market prices are low. In such periods, it’s always a good idea to have available cash. This is so investors can quickly react to changing market situations.

Risks of holding cash

While cash has its upsides, there are significant downsides and risks to holding cash too. For instance, if the economic situation is poor, cash can be a negative-yielding asset. Therefore, if you’re planning to stick to cash as a wealth-saving strategy, keep these risks in mind:

     2. Cash isn’t scarce (high in supply)

Gold bars and cash bills side by side, illustrating the gold vs cash debate for saving wealth

It’s difficult to see cash as a scarce asset. For instance, the U.S. dollar is printed by the United States federal government.. This means that they can produce only an infinite amount of cash. 

But, this creates a financial problem as well. If there’s too much cash in circulation, its value will drop due to inflation. This means you’re always at risk of losing your purchasing power. 

     3. Cash has no intrinsic value

Diversified investment portfolio with gold, cash, and other assets, showcasing diversification strategies

Cash is fiat money, meaning there’s no intrinsic value. This is because it’s not backed by a physical commodity like being under the gold standard. It only holds value because the federal government considers it a medium of exchange and a legal tender. 

Fiat currencies can fall in value when the economy is unstable. This causes users to lose faith in cash and switch to more stable commodities, i.e., Gold.

     4. Cash has no proper backing

Central bank policies affecting gold and cash value, underscoring economic influences on investments.

Unlike most assets, cash isn’t backed by anything. Its value is based on fiscal and monetary policies from the government and central bank. If these become ineffective, they can result in inflation or hyperinflation. It is important to note that these are issues that never affect Gold bullion.

Choose Gold and secure your wealth with ISA Bullion today

Having short-term access to cash is a good idea if you need to handle unplanned expenses. However, your wealth won’t grow if you leave it in cash.

Your best option is to diversify your portfolio with an asset like Gold. The benefits of Gold are aplenty as stated above in this article. 

If you want to learn more about the benefits of Gold in greater detail, check out this page on the ISA Bullion website. Ultimately, the key point to remember about Gold vs Cash is that the former appreciates over time and maintains its value during periods of economic uncertainty and inflation. 

This is why Gold is a highly lucrative investment and wins the cash vs gold debate every time hands down. Even if someone stores Gold today and retrieves it after 1000 years, it would still be worth a fortune, however, cash is just a legal tender guaranteed by the government. 

Countries may perish, borders diminished and governments gone, but Gold is here to stay as long as there are humans alive. 

If you’re looking to save your true wealth then investing in Gold with ISA Bullion is your best option.

Our app and dashboard platform can give you access to all the trading tools you need to boost your investment portfolio and profits. Starting Gold and Silver trading is super easy with ISA bullion. 

To understand how easy Gold trading is with ISA Bullion, check out our guide and safeguard your wealth from enormous cash risks.

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