Out With The Old, In With Gold
Keeping gold in your portfolio may be a way to invest and protect your wealth, but there's an alternative asset that's been growing in popularity in recent years: cryptocurrency. We now live in a world where investing in gold and cryptocurrencies can be a powerful and speculative portfolio for investors.
The relationship between crypto and gold
Should you invest in a single asset like Bitcoin as opposed to a traditional safe haven like real gold? Most gold sellers and most gold jewellery buyers will say 'gold, of course!
However, because of ever changing markets and unsettled economies, investors in the cryptocurrency and precious metals market are increasing. For hundreds of years, gold has dominated the safe haven arena. Some investors like to think of gold as insurance for their money. When there is concern about a country's currency or when there is an economic collapse, people often turn to gold because it can benefit in times of crisis. During recessions and periods of global turmoil, gold typically returns more than 30% annually.
Things are changing though. While Bitcoin was launched more than a decade ago, cryptocurrencies have begun to gain widespread acceptance. Historically, those who didn't want to ride the full-size stock markets invested in gold. However, the growing popularity of cryptocurrencies over the last couple of years has piqued a lot of interest.
Gold has more than 5,000 years of history on its side and it won't go anywhere, which means it's much safer. Regardless of demand, the supply of gold remains low because it is a rare and precious metal that cannot be created only recycled and repurposed. Cryptocurrencies are virtually, formless; they change all the time, they might be seen as part of popular culture – the rarity and lack of central authority has contributed to their popularity.
Political and social trends affect cryptocurrencies to a greater degree than gold, making precious metals a much safer option. And while gold prices have seen volatility comparable to short-term stocks, the value of the precious metal has remained strong over time.
Cryptocurrencies are a perfectly legitimate asset and have the potential to be a true 'store of value' - participating in a select group of assets, goods and currencies that can be stored, withdrawn and exchanged without damage. However, gold has at least 5,000 years of advantage as a global medium of exchange, value and greater liquidity.
While some cryptocurrencies have seen a meteoric rise among speculators, exposure to gold and cryptocurrencies is prudent as our notion of money continues into the 21st century. While Bitcoin does not have age on its side, its growing popularity reflects genuine investor interest. The crypto revolution has led to an explosion in the number and value of other digital currencies. Cryptocurrencies promise potentially high returns and diversification, but at the expense of security, and gold jewellery buyers are still looking to precious metals as a strong store of value in turbulent times. If you are looking for a safe asset that is negative relative to other assets, gold plays an important role in the strength of your portfolio as a buy and hold investment. It is a diversifier and a great inflation hedge. The benefits can result in positive returns over time. The case for Bitcoin is made on the assumption that it hasn't been used much yet. It may be a gamble - this is an interesting and exciting prospect for many investors, but even if they invest in gold, they can easily sleep knowing that they have their gold in their pocket, while taking a risk in the cryptocurrency brand. While many crypto projects fall flat, physical gold bars and coins always have intrinsic value. So, if it came down to which asset to buy gold is always the better choice.
