There are a lot of factors that make gold the best currency for investment or saving. Gold is portable, and divisible; splitting up gold does not change its value, as opposed to other metals, like diamonds. Gold cannot be counterfeited like diamonds and other precious metals nor it can be inflated, countries cannot reproduce gold as they normally do with fiat currencies.
Since centuries gold has always been a store of value, because its value often remains stable, the majority of the countries still determine the value of their currency against their gold reserves only because of its long-standing as a store of value. Gold has been used as a money form in one way or another.
Gold is considered as a currency in the free market, as it has a price that definitely fluctuates against other forms of exchange, like the euro, the yen and the US Dollar. Under a free market system, gold is a currency. Gold has a price, and that price will fluctuate relative to other forms of exchange, although it is not used as a direct method of payment but it can be stored as value. The gold standard was popular throughout human civilization, often part of a bi-metallic system that also utilized silver.
Throughout history, gold has been seen as a special and valuable commodity. Today, owning gold can act as a hedge against inflation and deflation alike, as well as a good portfolio diversifier. As a global store of value, gold can also provide financial cover during geopolitical and macroeconomic uncertainty.
Standing apart from the commodities complex, gold deserves to be seen as a differentiated asset as it has historically benefited from six key characteristics:
- Gold has delivered better long-term, risk-adjusted returns than other commodities
- Gold is a more effective diversifier than other commodities
- Gold outperforms commodities in low inflation periods
- Gold has lower volatility
- Gold is a proven store of value
- Gold is highly liquid
Gold always been a lot more efficient than cash at storing wealth. When the interest rates drop or remain low, your money in the bank “earns virtually nothing, When you account for inflation, that cash may have actually lost value. Gold is recognized as a having a long-term record of stability. correlations with most major currencies like the US dollar over the years has proven that the gold always stands out during the economic turmoil.
From gold coins to paper notes backed by the gold standard, only recently has money moved to a fiat system that is not backed by a physical commodity. Since then, inflation and a declining dollar have meant rising gold prices. By purchasing gold, people can also shelter themselves from times of global economic uncertainty. Gold levels may also influence national economies engaged in global trade and international finance.
Gold has a profound impact on the value of world currencies. Even though the gold standard has been abandoned, gold as a commodity can act as a substitute for fiat currencies and be used as an effective hedge against inflation. Therefore, it is an important metal to follow and analyze for its unique ability to represent the health of both local and international economies.
However, there is one other metal that is more valuable than gold – Platinum – Despite being nearly identical in appearance, platinum is more valuable than gold. Platinum’s high price point can be attributed to its rarity and density as precious metals are often priced by their weight.
Read more: Why Invest in Gold?