Gold has effectively safeguarded wealth for countless generations, unlike paper coins, which have not demonstrated the same ability. This characteristic has established gold as a valuable safeguard against inflation.
Back in 1970, an ounce of gold had a value of $35.8, which was sufficient to purchase a suit. If you were to possess an ounce of gold today and convert it at the current price, you would still be able to purchase a suit. However, if you had held onto $35 in paper currency, you would not have enough to buy a tie.
The capacity of gold to preserve wealth becomes even more significant in an economic climate where investors are pessimistic about the US dollar and rising inflation.
Throughout history, gold has consistently served as a hedge in both of these situations. As inflation rises, gold tends to appreciate.
When investors perceive that their money is losing value, they typically shift their capital into tangible assets that have traditionally retained their value. The 1970s serve as a notable example of escalating gold prices during a period of increasing inflation.
Despite the advantages offered by investing in gold, there are certain drawbacks that have limited its appeal to retail investors. The spreads involved in settlements can be wide, resulting in costly inbound and outbound trades. Storage and insurance costs are high, amounting to 0.4% annually. Moreover, gold is expensive and challenging to transport.
The emergence of gold-backed blockchain tokens like Universal Gold [UPXAU] will introduce digital portability, reduced fees, and eliminate storage costs entirely.