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Forbes: Should You Hold Gold and Less Cash in 2021?

June 23, 2021

Article by Steve Forbes in Forbes website

With short-term interest rates almost nonexistent, holding cash is frustrating, especially with the possibility of inflation eating away at its purchasing power.

What should you do?

This video segment of What’s Ahead, examines why you should consider moving some of your cash into gold.

(Video Transcript)

Hello, I’m Steve Forbes and this is What’s Ahead. We get the insights you need to better navigate these turbulent times.

With short term interest rates so low, holding onto cash is frustrating, especially with the prospect of inflation eating away its real value. Its purchasing power, given political and economic uncertainties, not being fully invested is very prudent.

What then, should you do? “One course of action is moving some, but certainly not all of your ready money, into gold.

The reason is basic: gold holds its intrinsic value better than anything else on earth and has done so for thousands of years. It’s rare, but not too rare. Unlike say, oil, gold is compact and easy to store. It’s not subject to supply shock like wheat or soybeans, whose prices can be volatile depending on weather and harvest in a particular year.

Every ounce of gold that has been mined is still in existence. The yellow metal is indestructible. You could freeze it, heat it, smash it, but you can’t destroy it. Moreover, despite centuries of attempts, it can’t be created in a laboratory. In modern parlance, it can’t be “hacked”.

Given the way that most gold is located underground, advances in mining techniques haven’t been able to dramatically increase its supply. The annual average growth rate in the global supply of gold is about 1%-2% a year. The rare gold rush like California experienced in the late 1840s, can boost that average output but not very much and not very long given the global outstanding supply.

In normal times, you should have some gold, say 5% in your portfolio not as an investment, but rather as insurance against the propensity of most governments to undermine the value of their currencies long-term.

These are not normal times, however. Never before have major governments printed so much money.

Moreover, never in history have interest rates been so low for so long. Investors don’t always grasp that a bad bout of inflation is usually not sudden. It flares, then seems to calm down somewhat, and then like a dormant virus it comes to ugly life again more awful than before.

That was the pattern of the US’s worst experience of inflation between the late 1960s and early 1980s. So even if this current round of rising prices abates a bit, don’t relax.

Look instead to see if the federal reserve and central banks get religion and focus on keeping their currency stable; these be gold or a broad basket of commodities.Sadly, there seems to be no prospect of that. As for cash, keep enough for immediate needs and emergencies, but the rest, think about preserving your purchasing power by .......

To read this article and view the video on Forbes in its entirety, click here.

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