Gold and Inflation- Gold as Cash Reserve
“In a large house there are articles not only of gold and silver, but also of wood and clay; some are for noble purposes and some for ignoble. 21If a man cleanses himself from the latter, he will be an instrument for noble purposes, made holy, useful to the Master and prepared to do any good work.” (2 Timothy 2:20-21)
Gold is a hot topic these days and needs to be explored a little more deeply here. Know also that most of the facts also directly relate to silver. In certain respects, gold is a safe store of value, but in others, it is a wild speculation. Therefore, it doesn’t fit neatly into this discussion of Safe Cash Reserve vehicles, but as we’ll discuss, some consideration needs to be given to it as a possibility of being your savings of last resort. First, let’s analyze (as best we can) using our five criteria:
Safety – (0-5) Volatile in dollar terms, but in a worst case scenario could be safest asset (also it has storage risk)
Liquidity – (2) Everyone values gold, but you must find someone willing to accept it (dealers do abound, so this shouldn’t be too hard)
Yield – (0) no yield, but possibility for appreciation (or depreciation)
Tax Benefits – (4) no tax on appreciation until earned
Liability Protection – (0) assuming you were in a situation where you had to reveal the fact that you possess this gold, if not, gold scores much higher here
Let’s be clear that we are not discussing owning a gold mining stock, or an option on the futures commodity price of gold. These are clearly speculations, which might do well, but are not part of any discussion of a Safe Money Cash Reserve. We are speaking about physical gold that you could sell if the dollars that you hold become worthless.
Why would this happen? We’ll get into that tomorrow.
Photo credit: tao_zhyn