Save more, spend less. This financial mantra continues to be a top New Year’s resolution. In fact, according to Fidelity’s Financial Resolutions survey, “saving more money” is the number one 2022 New Year’s resolution for 43% of those surveyed. Learn how the qualities of physical gold can help you save money this year and beyond.
What Does It Mean to Save Your Money in Gold?
Using gold as a way to save your money “is a time-tested, solid proposition,” according to the website Seeking Alpha. Simply put, saving your money in gold means converting at least some of your cash to physical gold.
“Saving money with gold provides you with the safety of a ‘savings’ account and the potential for…gains” without the same type of risks typically associated with asset classes like stocks, bonds, and mutual funds, the Everything Finance blog explains.
Everything Finance further notes that gold has historically been accepted as a form of currency, just as cash has been.
Here are four benefits of saving your money in gold.
1. Gold Might Outperform Cash Over Time.
Even in an interest-bearing account, stashing money in the bank yields little to no interest these days. That’s because interest rates have been meager in recent years. The average interest rate for savings accounts is only 0.06%, Bankrate notes. Factor in the impact of inflation, and the value of cash actually can decline over the long haul.
On the other hand, gold has a track record of proven performance over the long term. It has gained favor as a safe haven from the volatility of some asset categories.
Gold can be a solid means of saving your money thanks to its potential leg up over cash.
2. Gold Has a Longer Track Record Than the Dollar.
Gold has been around for thousands of years, and the first gold coin is believed to date back to the 5th century B.C. By contrast, the U.S. issued the first U.S. coin in 1793 and didn’t start using paper money until 1861, making the dollar much less of a time-tested asset than gold.
Therefore, physical gold can be an appealing choice to diversify a portfolio with cash-heavy assets priced in U.S. dollars.
3. Gold Is Not Your Typical Currency.
While gold has been treated as currency for centuries, it is not fiat currency—currency issued by a national government and not backed by gold.
The central bank of a country can impact the value of its fiat currency in several ways, such as introducing new monetary policies or merely printing more cash. However, a central bank cannot directly impact the price of gold. But central banks can indirectly affect the price of physical gold by being significant purchasers and holders of the yellow metal.
Given that it’s not tied to the operations of your everyday currency and it’s been given the seal of approval by central banks, physical gold can be an attractive option for saving your money.
4. Gold Can Be a Hedge Against Inflation.
The U.S. inflation rate has recently spiked to 6.8%, thereby diluting the value of paper money. Inflation refers to the rising costs of goods and services. Therefore, when those costs go up, the purchasing power of the U.S. dollar goes down.
While inflation typically hammers the dollar’s value, it usually doesn’t have the same impact on physical gold. In fact, high inflation rates can actually give a boost to gold, according to the World Gold Council. In part, that’s because gold is a tangible asset not subject to credit and default risks the same way fiat currencies are. And because gold is traded in U.S. dollars, a decline in the value of the dollar typically means an increase in the price of gold.
So in times of escalating inflation, physical gold can serve as a protective hedge. And it’s never a bad idea to prepare for the possibility.
“If you have a circumstance where the fiat [fails],” says Rick Rule, former president and CEO of Sprott U.S. Holdings, “the upside you get in your gold and silver means that a small insurance premium, which is to say a small holding in physical gold and silver, offsets a very large deterioration in the purchasing power of your fiat currency.”
Getting started with gold is simple. Request your free Gold Information Kit to learn everything you need to know about converting a portion of your cash into physical gold.