When it comes to currency, we think about dollars and cents and have been for a long time.
While we might see ads popping up every now and then encouraging us to invest in gold, we don’t actually think of it as currency anymore.
But the fact is, in all this time, it’s never stopped being money.
If you look back to 1970, 100 ounces of gold could buy you an entry level house. These days it’s worth about a half a million dollars…so could still buy you an entry level house in many parts of Australia, if you exchange it for cash.
It maintains its purchasing power and it’s a physical asset you hold. It can’t disappear out of your bank account in a matter of seconds. It’s not just a number on a screen that can be wiped out at any time. It gives you options.
Gold IS money…other things aren’t
The physical aspect of gold is important. It holds an inherent value. Once upon a time, money was actually made out of it. Not anymore, but things made out of it will always have value…they’ll be worth their weight in gold, so to speak.
What we see as money now takes the physical form of things with much less value. The paper that money is printed on is worth its weight in paper. A $50 note has no more inherent value than a $5 note … or even than fake money from the Monopoly board game. Coins are made with non-precious metals.
And that’s only if you actually have physical cash in your wallet. For most people now, money is only a number on a screen.
That’s why gold is actually money. Everything else is just credit and the only reason it’s worth anything, is because governments and central banks say so.
Because of its liquidity, gold can always be bought and sold on the day. You need $100K and you’ve got $100k worth of gold, you can sell it.
If you had a Rolex watch worth $100k, it could take you months to sell it because you’d need to find a buyer. And you may not. Assets like watches, art and even property can never be as liquid as gold. They rely on someone else wanting them…not just on what they are inherently worth to the world.
That’s why you could probably buy a bunch of old mobile phones or other appliances for less money than the value of what they are physically made of…because no one wants them.
It’s yet another reason why gold IS money and those things aren’t.
Physical assets and good debts
Gold bullion is like property. It’s something physical that will always hold its value.
If you buy it, accumulate it and hold it through multiple cycles, you will increase your wealth over time, while your debt either stays static or goes down.
Cash in the bank is something that will actually lose value in real terms every day that you hang onto it.
If you’re stuck with today’s money when tomorrow comes around, you are always going backwards. Especially now that inflation is finally starting to ramp up and only looks like getting more intense in coming years.
Purchasing an asset will mean that you are using today’s money to purchase tomorrow’s value. A house bought for $20,000 in the 1970s is worth millions of dollars today. If that home owner had however kept their $20,000 in the bank, it would be worth much less today than it was back then.