COVID-19 has had a huge impact on many of our finances. Your income may have dropped over the last year, and you may even have had to dip into your savings. As we prepare for post-pandemic life, you might be thinking about how to save for the future. But interest rates have hit historic lows, and savings accounts are nowhere near as appealing as they used to be. It is not all bad news, though. Putting a portion of your cash into gold can be a great way to improve your overall portfolio returns over the long run.
Here, U.S. Money Reserve explains the four biggest benefits of moving a portion of your cash into purchasing gold instead of only storing cash in a savings account or under your mattress.
- Gold Can Be a Hedge Against Falling Interest Rates.
The average interest rate for saving accounts is incredibly low at 0.07% (as of January 2021). And the average interest rate for certificates of deposits (CDs) is not much higher. In contrast, gold prices rose substantially in 2020, climbing an incredible 25% last year.
Therefore, it is no surprise that many portfolio holders are diversifying with gold. And those “in the know” were putting their savings into gold long before last year’s gold rush. For example, billionaire Ray Dalio announced that “cash is trash” during a CNBC interview last January.
Dalio continued, “What are [central banks] going to hold as reserves? What has been tried and true? They are going to hold gold. That is a reserve currency, and it has been a reserve currency for a thousand years.” He also said, “When you look at the geopolitical strife, how many foreign entities really want to hold dollars? And what are they going to hold? Gold stands out.”
- Gold Can Outperform Stocks.
Some people put a portion of their savings into the stock market, hoping that they will get a good return. But any decision involves a potential level of risk and reward. The numbers do the talking here. In April 2020, gold had outperformed U.S. stocks over the previous 15 years. Gold gained an average of 9.2% each year, while the S&P 500 Index gained 9.05% per year—with dividends going to purchase more stock.
Forbes puts it very simply: “There’s not one single item or [asset] that can come anywhere close to beating gold’s mega, long-term track record.”
- Gold Can Protect Your Wealth Long Term.
Forbes also refers to gold as “global money”—the only currency that you can use all around the world. It is far more durable than paper currencies, and it is not backed by any central bank or government. Some experts even refer to gold as an “insurance policy” because geopolitical and economic disruptions do not affect its price.
- Gold Offers a Hedge Against Inflation.
Converting a portion of your cash into gold can take saving to a whole new level. Rather than only keeping your funds in a safe place with little or no room to grow, purchasing gold can provide you with a hedge against inflation.
Inflation is the overall increase in the cost of goods and services, which decreases the purchasing power of paper money. Therefore, inflation can affect the profit potential of your cash savings.
“High inflation decreases purchasing power and undermines the value of money,” says John Rothans, Chief Procurement Officer and Master Numismatist at U.S. Money Reserve. “Low inflation, however, suggests a dramatic collapse in the price of goods, which restricts spending and could trigger deflation and a broader recession.”
However, inflation does not have the same effect on gold. This is because gold is not tied to credit or default risks. In fact, high inflation can boost gold’s price. As a hedge against inflation, gold can improve stability in a cash-heavy portfolio and help preserve your wealth over the long term.
For more information about protecting your wealth with gold, you can download U.S. Money Reserve’s free Gold Information Kit and contact a U.S. Money Reserve Account Executive.
About U.S. Money Reserve
Based in Austin, Texas, U.S. Money Reserve has helped more than 550,000 clients looking to diversify their portfolios and protect their wealth with precious metals. Their extensive inventory includes legal-tender gold, silver, platinum, and palladium coins backed by their issuing government for content, weight, and purity. As a major precious metals distributor, U.S. Money Reserve holds an A+ rating from the Business Better Bureau and an AAA rating from the Business Consumer Alliance.
Learn more about U.S. Money Reserve on the company’s website.