Why is gold not considered money?
The truth is that gold is not currency because it doesn't meet the economic definition of “currency” and will never be able to in the modern world. Currency is something that can be used as a medium of exchange and must have certain characteristics which have been known since at least the 1600s.
Though the post-war Bretton Woods system briefly tied the value of the U.S. dollar to a specific quantity of gold, economic inflexibility and limits on a government's ability to adopt monetary strategies forced the U.S. to abandon the gold standard. Since 1971, the U.S. has used fiat currency as its monetary system.
Under a free market system, gold is a currency. Gold has a price, and that price will fluctuate relative to other forms of exchange, such as the U.S. dollar, the euro (EUR), and the Japanese yen (JPY). Gold can be bought and stored, but it is not usually used directly as a method of payment.
The reasons behind gold's enduring value include: Gold is perceived as a symbol of wealth, power, and majesty. Gold has had an exalted position throughout the ages as a highly coveted, even worshipped material. Gold has been used over millennia as jewelry and a means of exchange.
A related problem was one of instability. Under the gold standard, gold was the ultimate bank reserve. A withdrawal of gold from the banking system could not only have severe restrictive effects on the economy but could also lead to a run on banks by those who wanted their gold before the bank ran out.
Gold can be bought and stored, but it's typically not used as a payment method like cash, according to Investopedia. However, it can be converted to cash in almost any currency.
The US government ensures the value of Treasuries (and thereby the dollar) by ensuring that foreign and domestic economic participants trust that the United States will always pay back its debts. Indeed, investors often consider Treasuries to be “risk-free” because US creditworthiness is so strong.
It has limited supply growth, making it a rare tangible asset. During times of economic turmoil, when cash is devalued, gold prices often rise, thereby preserving wealth. It offers higher appreciation potential than cash over the long run.
Pros of gold investing
Buying gold can have several advantages: Hedge against inflation: As inflation increases prices, the dollar's purchasing power decreases. So, if you have cash, you're effectively losing money. Gold, on the other hand, may increase in value during inflation.
Gold and silver were indeed considered money under the US Constitution, and the Constitution granted Congress the authority to coin money, regulate its value, and specify the standards for coinage.
Why silver will never go up?
While it's impossible to definitively say that silver will never go up, here are a few reasons why some people may believe that silver prices could remain low or stagnant: Oversupply: If the global supply of silver outpaces demand, it can put downward pressure on prices.
Gold prices are set by several banks, an oversight committee, and a panel of internal and external chair members, who calculate the figures based on supply and demand in the gold futures derivative markets and establish averages for both the spot price and the fixed price.
Gold is the most non-reactive of all metals and is benign in all natural and industrial environments. Gold never reacts with oxygen (one of the most active elements), which means it will not rust or tarnish.
Under the gold standard, the supply of gold cannot keep pace with its demand, and it is not flexible under trying economic times. Also, mining gold is costly and creates negative environmental externalities.
Because despite being a store of value, it is not a medium of exchange or a unit of account. {Explanation - Gold is not money because it is neither a medium of exchange or a unit of account.
Gold is a finite resource. Therefore, prospecting and mining physical gold is increasingly more difficult and more expensive. As demand outpaces supply, its price increases.
On the other hand, the cons of investing in gold can include its non-paying interest nature and its highly volatile price, and it may not be the most profitable asset as compared to other investment options.
| Per Gram | |
|---|---|
| 10K | $28.02 |
| 14K | $38.84 |
| 18K | $50.41 |
| Weight | Euro (EUR) | US Dollar (USD) |
|---|---|---|
| Gold Price per Gram | €64.05 | $70.06 |
| Gold Price per Ounce (31,1 Grams) | €1992.2 | $2179.03 |
| Gold Price per Kilo | €64050.72 | $70057.4 |
| 24H Change | 0.62 % | 0.64 % |
For decades now, there has been a great deal of speculation about a potential plunge in the value of the dollar. 2024 is almost certainly not going to be the year when the dollar's reserve currency status outright ends. That said, it pays to be prudent.
What is the strongest currency in the world?
The Kuwaiti dinar continues to remain the highest currency in the world, owing to Kuwait's economic stability. The country's economy primarily relies on oil exports because it has one of the world's largest reserves. You should also be aware that Kuwait does not impose taxes on people working there.
4) A Rise in the Cost of Borrowing: As the reserve currency, the US Dollar benefits from lower borrowing costs. Losing this status could result in higher borrowing costs for the US government, which could make it more difficult to finance the country's debt and could result in higher interest rates for consumers.
Considering that inflation remains persistent in today's economic environment, you may be wondering if it's smart to convert all of your cash savings into gold. In short, the answer is probably not, but it could be wise to invest some of your money in the precious metal.
But gold, including 1-ounce gold bars, has traditionally served as a hedge against inflation, so it can be a smart investment in 2024. The precious metal tends to retain its value or appreciate during periods of rising inflation, acting as a counterbalance to the eroding purchasing power of regular currencies.
It's a Good Balance for a Cash-Heavy Portfolio
If the bulk of your current investments are in cash in one form or another, converting some of that cash to gold can be beneficial. It's a great way to round out your portfolio so you're not entirely dependent on cash.
