Why is it gold money? Part 1.

Why is it gold money?  Part 1.

If you have not yet invested in precious metals, but are only interested in this type of investment, the following information will be of interest to you and will help you make the right decision.

1) Gold is not a commodity. Gold is money. Soybeans, crude oil and other commodities and agricultural products are consumed and disappear as commodities. Its value is determined by its usefulness as a commodity. On the contrary, gold is not consumed or disappears. In fact, all the gold mined throughout history still exists. This extracted gold has value because it is used in economic calculations and retains purchasing power for a long period of time. For example, the price of crude oil in gold has not changed in the last 60 years, in other words, an ounce of gold can buy today the same amount of crude oil as in 1951.

2) Gold is not an investment. Gold is money. Gold does not generate cash flow. Gold does not produce wealth, like a company that creates wealth by producing goods and providing services. When you buy gold, you are not investing. It is simply exchanging its national currency for another form of money: gold. Therefore, the decision to buy gold should be based on the properties and characteristics of gold compared to the national currency. In this respect, gold is superior to any national currency. For example, a barrel of oil now costs more than $ 100 and in 1951 cost less than $ 3. Thus, the dollar was unable to maintain its purchasing power. Interest income earned with a bank deposit during this time period offsets some of the losses in currency ownership, but it’s important to remember why interest is paid in the first place. The interest on the deposit is offset by the risks of owning fiat currency: it can be risks of inflation, bankruptcy, capital controls and other events that can impair your purchasing power. Gold does not carry these risks.

3) Do not sell gold, especially gold coins, but accumulate it. It is very easy to succumb to the emotional temptation to sell precious metals, just like brokers who benefit from fluctuations in the price of precious metals. Let professionals and speculators do this. It is very difficult to make money selling gold. Better save gold for a long period of time. Plan your budget so that each month you buy some gold for your retirement or as insurance for a rainy day. Save with gold, which you can spend, if necessary, for new investments or for the purchase of goods. After a long period of time, it will “skim the cream” of gold savings, as paper money will lose some of its purchasing power in the same period of time.

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