Gold is better than cryptocurrencies due to its durability and intrinsic value, explains American banking giant Goldman Sachs.
“Precious metals remain a relevant asset class in modern portfolios, despite their lack of yield,” analysts at Goldman Sachs wrote, as quoted by Bloomberg.
“They are neither a historic accident or a relic,” and are still relevant despite new assets like cryptocurrencies, they said.
Investors boost the amount of gold in their portfolio as uncertainty increases, making fear the key medium to short-run driver, Goldman said. Wealth is the long-term driver, especially in emerging markets such as China, where growing income levels over the next few decades will support prices, it said in a report.
Goldman analysts used several criteria to compare gold and bitcoin, including durability, portability, intrinsic value and unit of account. In three categories gold is better, losing to bitcoin only in portability:
- Durability: While both require expertise for correct long-term storage, gold wins because cryptocurrencies are vulnerable to hacking through online wallets or the user’s computer or smartphone, are subject to regulatory risk, and network and infrastructure risk during a crisis.
- Portability: Transferring bullion can be expensive, given its weight, need for a high level of security and high import taxes in some countries, such as India. In contrast, it’s much faster and cheaper to move bitcoins.
- Intrinsic value: There’s a limited supply of gold and other precious metals in the Earth’s crust, whereas in the case of cryptocurrencies, it’s easy to create alternatives, meaning there’s effectively no control over supply at a macroeconomic level and no intrinsic value due to rarity.
- Unit of account: Gold is better at holding its purchasing power, and has much lower daily volatility. Bitcoin/dollar volatility has averaged almost seven times that of gold in 2017, the bank said.
Original source: RT