Let’s analyze these popular statements a little, if we take as an example the current war that is taking place in Ukrainian territory, we can under common logic affirm that it would be difficult to transport 700 thousand US dollars in gold, since this amount would be equivalent to a bank ingot of approximately 12 kilos, in a country at war with requisitions of soldiers at the checkpoints, it would be a bad idea to transport it with us, it would also be a bad idea to leave it in a place that we know little about what will happen or when we will be able to return.
We can affirm that the popular belief that it is a safeguard of value is conditioned to where we physically have our metal, since in an economy at war, we cannot expect to transact our bullion in a bank or safe place, in addition to the fact that its price would be linked to those who are really willing to buy it from us and for how much.
Another point to note is that as we mentioned, the value receipt depends on having buyers willing to buy our assets from us, currently, China and Russia are the countries that have the largest amount of physical gold and as most know, President Nixon eliminated the Dollar-Gold standard in 1971, making it no longer a convertible currency.
So who really stores value in gold?
Analyzing the history of gold, this increased its price in each crisis that the planet experienced, the turbulence in the markets always led to a refuge in this commodity that does not disappoint, or rather, did not disappoint.
During the most recent turbulence, gold is up 18.1% since the beginning of 2020, a time that includes a global pandemic, which led to a massive recession, a bear market and a soaring rise in commodity prices with inflation high, being the moment of gold to shine. However, although the commodity did show reasonable returns, these were much lower than those of equities and commodities in general, and slightly higher than those of bonds. So gold did well, but worse than expected.
According to J.P. Morgan “gold saw outflows of around $7bn at the start of the year, while bitcoin saw inflows of at least $3bn. This caused the relative underperformance of gold and sent the Bitcoin price skyrocketing.”
Fair enough, I think this underperformance in the face of current turbulent periods, including the aforementioned war, where gold was expected to rise, was overshadowed by the role of cryptocurrencies in both Russia and Ukraine receiving money from elsewhere. of the world, showing that the price of gold is simply speculation, and it is not as easy to transact as it is bitcoin.
I am not mentioning that saving in physical gold is not an excellent option, on the contrary, this metal has been with us for thousands of years being chosen to reserve value, but I would not reserve my most liquid savings in it, but I would bet on bitcoin. I think that the price of both assets is unclear, bitcoin is very young and gold is physically linked to how much we are paid for it at the time we want to sell it.
In turn, Bitcoin can be used as a means of payment and does not pay interest, allowing it to be stored for long periods of time. In addition, compared to precious metals, cryptocurrencies are not in danger of theft, they have security measures.
CEO of South American Miners (SAM)
Source: Ambito
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