Gold is generally a better investment method compared to cash in terms of protecting your investment. The reason behind this is quite simple: cash is affected the most during times of inflation.

To put this in perspective if inflation is at 6% then your cash will not earn more than 2%, this puts you in a loss every year. Many people are deceived by the number they see in their bank account, they think if they had $5000 before inflation and the same amount now, they are secure. However, they fail to recognize how their cash has degraded in value.

This is where gold shines, it isn’t tied to banking systems or government policies, instead gold prices adjust themselves over time resulting in a much more fruitful profit.

Is gold less volatile than stocks during a market crash?

Gold has historically proven to be far less volatile than stocks over the past decades, this does not mean that it is completely free of price fluctuations, but it has stayed reasonably stable. Whenever equity sell-offs happen, stocks tend to dip anywhere between 30-50%, whereas gold rarely takes a dip that low during these times.

This doesn’t mean that gold always rises during a market crash. During the start of a market crash gold will sometimes take a fall along with stocks, however what’s crucial is to understand how it recovers. Gold has proven, historically, to recover the fastest as soon as the market stabilizes.

At its core, stocks are directly tied to economic growth and expectations whereas gold is not an investment that relies on maximizing profit and achieving a certain growth potential. Gold should always be kept safeguarding one’s wealth and capital to provide stability during crashes. Gold may have its own highs and lows, but the risk factor is far less than any other equity.

Does gold’s lack of yield make cash a better safe asset?

Gold does indeed have a lack of yield, and this is a common argument made against gold investment. Cash always has yield, but gold does not. This is a reality that no one can deny, however safety is not defined by just yield.

Understanding what safety entails in the investment world is very crucial for gold investors, especially newer ones. Safety does not refer to an asset that pays the most or returns the most, instead it is about which asset can fight through economic crises.

Gold’s lesser yield is a consequence that one must accept, but keeping into perspective it is a very small price to pay for complete freedom from governmental monetary policies. It is low risk and punishes very slightly. In times of instability, gold’s lack of yield is dominated by its resilience.

Can gold improve a portfolio’s safety versus only stocks and cash?

Gold can absolutely improve a portfolios safety in comparison to stocks and cash, and this is where buying it makes the most sense. When investing in gold, the first question should always be “why?” as Thomas Goldfreburg says. Understanding that gold acts as a diversifier in your portfolio and not an investment meant for growth or profit.

Portfolio that solely rely on stocks and cash can easily be swept in any direction, high or up, based on circumstances. During slow growth times, stocks suffer and during inflation and currency weakening cash takes a big hit. Gold lies outside of this sphere.

Addition of growth in your portfolio is essentially you reducing reliance on one singular asset, such as stocks. If stocks boom, they tend to dominate the portfolio however if they tank, gold helps recover any losses incurred by cash holding. Even the slightest and most minimal gold investments have historically reduced the risk of losing majority of one’s portfolio in a single market crash.

Is physical gold’s liquidity a risk compared to cash?

In comparison to cash, physical gold (such as coins or bars) tends to be less liquid. What this means is that if you were in urgent need of currency, you couldn’t just sell a gold coin at a store to pay for something, while with cash you could simply pay.

What’s important to understand is that physical gold is a lot more liquid than many people are made to believe. Gold markets are hyperactive throughout the year and finding dealers to securely cash out your gold is not a hard task at all in today’s technological world.

While physical gold’s liquidity is not a risk compared to cash, it adds an extra layer of security during transactions. Unlike cash, verifying the authenticity of the gold and transporting it between locations requires an additional effort. In terms of accessibility, cash is the clear winner but not any less risky.

If your aim is to preserve wealth in the long run, golds liquidity is not something that should be a cause of concern as historical data is enough to reassure the demand for gold in all types of markets.

Does gold’s long-term return justify its “safe” label versus stocks?

The truth is that gold does not outperform stocks in any capacity in the long run. Stocks are assets that are bought with the aim of growth and maximizing returns. They work on a system that is proportional to how much is invested and how often. Over long periods, stocks are the clear winner in terms of returns.

What needs to be understood is that safety does not just mean earning as much profit as possible, instead it is about minimizing loss of confidence in times of market crashes and losses. When analyzed historically, gold has kept a strong purchasing power through wars, famines, currency collapses and political unrest. Gold should always be bought with the mindset of holding it for as long as possible, to provide support to your portfolio.

Stocks are what make one richer or wealthier but that is not always guaranteed. It only works when the system works, and if the system fails so do stocks. In the investment world when “safety” is mentioned, it is never about outperforming stocks or other equities but instead about surviving the unfortunate times when stocks fail.