We have repeatedly said that investment gold has a lot of advantages over currencies. To finally put an end to this issue, we hold a “financial duel” between gold and the world's dominant currency, namely the US dollar.
Please note that both assets in this article are reviewed in terms of long-term savings protection.
The fight will consist of three rounds, each of which will determine the strengths and weaknesses of the opponents.
Round 1. Place in history
The history of the US dollar began at the end of the 18th century. More than 200 years ago — that’s a very good term for a national currency. However, this time period seems quite insignificant when we recall that gold has been used as a financial asset for over 2,500 years. Dozens of mighty powers have disappeared from the world map, but the yellow metal has survived all wars, crises and epidemics.
Time has no power over this asset. Gold coins and bars will always remain a means of payment, which will be readily accepted in 10 and 100 years. Paper money cannot boast of such “vitality” — it loses its value as soon as the country that issued it disappears, or the government carries out a monetary reform.
Results of the first round. Gold is an older asset that has had a greater impact on the development of trade and the economy, and has retained its importance over the centuries. One can, of course, assume that the same successes await the dollar ahead, but who can guarantee this?
Round 2. Resilience to inflation
Inflation is an increase in the general price level over a long period of time. As a result, for the same amount of money one can buy fewer goods and services than before.
The American currency perfectly demonstrates this phenomenon. In 2001, one dollar could buy just as $1.5 can buy today. At first glance, it seems that the difference is small. Yet imagine that you have $10 thousand on your account, and in 20 years your savings have depreciated by half. You are unlikely to be happy with such a state of affairs.
Therefore, more and more people choose investment gold, which is practically immune to inflation. Thanks to this property, the yellow metal successfully retains the purchasing power of the money invested.
Results of the second round. Gold has an excellent “immunity” to inflation, while the dollar is constantly exposed to it.
Round 3. True value
Can things produced in unlimited quantities, on a whim, be considered really valuable? Well, this is exactly what has been happening to the dollar. According to the Federal Reserve System*, there are approximately $2 trillion in cash in circulation today.
What is all this money backed by? Only by trust in the American economy. The US gold reserve is worth only $11 billion and cannot back every dollar with the precious metal.
At the same time, the value of gold is attributable to its rarity, its demand in a number of economic sectors and inaccessibility. The amount of the yellow metal in the earth’s crust is limited, and year after year it becomes more difficult to mine. The US Geological Survey has calculated that in case of no innovation is made in the mining industry, all gold deposits available could be depleted by 2035.
Results of the third round. Gold will always be valued as a rare and useful metal. The dollar is in demand only as long as the US economy remains relatively stable.
WE’RE ANNOUNCING THE WINNER!
Gold has proven its superiority in all three rounds and confirmed its status as the most reliable and durable defensive asset. Undoubtedly, the dollar is a convenient means of payment, but when it comes to strengthening Financial Security, the yellow metal is unrivaled.
If you do not want to “share” your savings with inflation and economic crises — create your personal gold reserve! The GIG-OS online platform provides access to a broad selection of investment gold bars of the highest fineness (999.9) from anywhere in the world, at any time of the day. We recommend using subscriptions and special projects of the platform for making the most profitable purchase.
Onward towards Financial Security!
*The Federal Reserve System — aka the Fed, is the independent agency that oversees the commercial banking system and acts as the central bank of the United States.