June 10, 2020
Gold has been respected throughout the world for its value and rich history, which has blended into cultures for thousands of years now. It’s widely accepted as a good investment and there is no doubt that in previous years, demand for gold has experienced a boost along with increased wealth of emerging market economies.
The shiny asset has a physical form that can be melted easily into bars and coins and jewelry and its relevancy cannot be ignored as a strategic asset. The overall portfolio of the investor is easily enhanced as it is a source of long-term returns. Its price usually increases in response to activities that may cause the value of other paper investments to decline sharply. Multiple factors determine the price of a gold future contract like, the current ongoing price of gold; the predicted changes in supply of and demand for the precious metal; the estimated cost of transporting and storing the physical gold; and the risk-free rate of return for the holder of the gold. The price of gold is adjusted in real-time based on financial evaluations of anonymous auction rounds which usually runs every 45 seconds. But when all traders buy and sell orders and imbalances are within 20,000 troy ounces, the price is fixed. However, in times when there is high demand for physical gold, the current price can be higher than the future prices. Hence, gold is considered as good alternative for diversification as it generally performs better when other classes of assets are not doing much well.
While gold is a good stake on inflation, but it's certainly not the only one. On the other hand, Crypto assets are fresh and trending source of investments . They might be a topic of many discussion panels or be in a bubble, but the trend shows that Crypto world plays an important medium of exchange and store the value for the future .
Investment in crypto currency definitely adds credibility to blockchain and it adds value as an alternative to traditional currencies. Whereas gold is available as a material, cryptocurrency is a digital creation, yet both of these valuable assets are equally preferred by the investors.
Once gold is mined, it is ought to stay in the world, therefore, it has a far greater tenure than crypto currency but it's difficult to say which will be exhausted first and define its rarity. The mining of Cryptocurrency and gold actually has a lot in common as the process of mining is a long-term commitment and requires significant capital to undertake the process. The costs of acquiring the tools and the electric power required to run the equipment are significant, while it’s easier for anyone to get into mining a crypto coin. Although like gold, Cryptocurrencies are also the most durable asset with an additional benefit of transferring from one address to another in seconds. Independent researchers Max Krause and Thabet Tolaymat calculated that it takes about 17 megajoules of computer power to generate US$1 in Cryptocuurency like Bitcoin, even when the energy used for peripheral activities, such as cooling computers, is not factored in and whereas in comparison, it takes 5 megajoules to mine US$1 in gold.
Gold and Crypto Coins have both been recognized as secured assets. While gold has long been identified in this way, crypto world has more recently become something that investors drift to in times of trading distress or market speculations. Both are speculative investments. The supply of gold is dependent on the amount mined out of the earth’s crust. The amount of gold that exists is finite, and the remaining supply is steadily falling whereas mining crypto coins involves using computers to solve complex math problems.
Both these option of investments have drawn significant attention, but investors need to mind that risk is inherent to any kind of investment, so no money should be invested that they cannot afford to lose and can always carry out a thoughtful research for themselves and make a wise decision. Investors who think about trading either of these can benefit significantly from comparing and contrasting the two for themselves. Betting or investing in any form of money is a long game, and the wise place multiple bets or investments.
There are several benefits of cryptocurrency over gold as an investment like ease of use is one of the reason why cryptocurrency is in high demand. All we need is a smart device with an internet connection and instantly we can become our own bank making payments and trade online and enjoy benefits of instant transaction settlement within few seconds. There are also some significant tax savings associated with the investment in crypto world than investing in gold depending upon the small ties or long-term investments. These being completely digital and an emerging asset, it can be easily sold and can be used as a digital currency.