Should you convert your cash savings to gold? (2024)

FAQs

Should you convert your cash savings to gold? ›

Considering that inflation remains persistent in today's economic environment, you may be wondering if it's smart to convert all of your cash savings into gold. In short, the answer is probably not, but it could be wise to invest some of your money in the precious metal.

For short-term needs, cash is better due to its unmatched liquidity. For long-term buy-and-hold investments, gold is preferable to protect against inflation and provide portfolio diversification. The ideal solution is to hold both but allocate based on your specific needs and risk tolerance.

Key takeaways: Gold can protect investors from the devaluating effects of inflation. Savings accounts deliver returns only if interest rates are higher than inflation. Digital gold can offer the best of both worlds: underlying appreciation plus yield.

Experts typically recommend devoting between 5% to 10% of your portfolio to it. "This amount aims to balance the benefits of diversification with the unique risks and fluctuations of the gold market," says Nicholas Ganesh, manager at Endeavor Metals Group.

Why? With an emergency fund, you'll want to be able to access your cash in a pinch and protect your principal. However, if you're saving for retirement, you probably won't tap that cash for years or even decades and, therefore, can take on more risk.

The bottom line

It's probably not a good idea to convert all of your cash savings to gold. After all, doing so could make accessing cash a challenge if and when an emergency arises. On the other hand, chances are that you could benefit from allocating at least some of your investment assets to the precious metal.

And like all gold investments, 1-ounce bars can serve as a hedge against inflation. That means buying in now, while inflation remains high, could deliver big benefits.

There are several risks to investing in gold, including as follows: Price volatility: The price of gold can be volatile, and it may fluctuate significantly over short periods. This can make it difficult to predict its value and can make it a risky investment.

Instead, the average gold investor should consider gold-oriented mutual funds and ETFs, as these securities generally provide the easiest and safest way to invest in gold. Larger investors seeking direct exposure to the price of gold can buy gold directly through bullion.

stocks: Which is the better investment? Stocks have generally performed better than gold over the years, but there can be exceptions.

How many ounces of gold should I own? ›

As a general rule, advisors tend to recommend limiting gold to 10% or less of the total value of your investment portfolio. However, the exact recommended amount of gold you should buy depends on a number of considerations that only you truly know.

Physical Gold

According to the recent CBDT circular, regardless of marital status, men are limited to owning a maximum of 100 grams of genuine gold as jewellery. In contrast, married women can possess up to 500 grams, unmarried women up to 250 grams, and men, in general, up to 500 grams.

Dividing the total amount of money by the price per troy ounce gives us the total ounces of gold that one can purchase. Therefore, $100,000 divided by $2,018.39 equals approximately 49.57 troy ounces of gold.

A $100,000 savings account balance is fine if it aligns with your goals. But it could be a red flag if you don't need that much money there. Some people put all their extra money in their savings accounts because they feel as if it's the safest option. They'd rather do that than take on any risk.

Cash equivalents are financial instruments that are almost as liquid as cash and are popular investments for millionaires. Examples of cash equivalents are money market mutual funds, certificates of deposit, commercial paper and Treasury bills. Some millionaires keep their cash in Treasury bills.

How much is too much? The general rule is to have three to six months' worth of living expenses (rent, utilities, food, car payments, etc.)

The value of gold has always risen during political and economic uncertainty, upset, war, devaluations, and more; as cash loses its value and banks fail, gold remains a valuable asset.

Investing in gold has long been considered a safe and stable way to diversify your portfolio and mitigate risk from other investments. That's because, for starters, gold tends to move inversely to the stock market, meaning that when the market is in turmoil, gold tends to rise in value.

Cash can be ideal for short-term or emergency savings. If you know you'll need access to your money within a year, then it can be worth keeping cash around. Maybe you know that you'll be doing a renovation in December, and plan to start saving in January.

Gold is considered an inflation hedge, and if you think inflation has already tempered or will be soon, that might prompt you to sell your gold investment. This could be especially true if you increased your gold allocation relative to other assets due to recent conditions.