This is a question I get quite often. Depending on the price of gold, people always ask me if they should buy gold. Gold is a commodity, and it is quite interesting. It is liquid (to some degree) like cash, it holds its value, but it doesn’t earn money (like cash). It can be stored privately or stored virtually though the latter would be annoying if the SHTF.
Had you bought gold in the 1970s, you could be sitting on a lot of value. Gold could have been purchased in 1970 for about $36 an ounce. It actually popped close to a whopping $2500 an ounce in the 80s. $36 in 1970 could buy a lot of things, but that same $36 today can buy you lattes for a week. That same $36 investment in gold can buy you lattes for a year.
The US currency is a fiat currency, which means it has nothing backing it up. It used to be on a gold standard, but those days are gone since the 70s. Gold prices fluctuate quite a bit, but I haven’t seen it under $1000 an ounce since 2007. Also, when you deposit cash in a bank, it is legally no longer yours. It is the property of the bank until you withdraw it. They can keep it and not give it back to you, if for example, the bank fails. That is why FDIC exists to protect you for some amount of your money (limits vary depending on how the account is created.)
So is gold better?
Maybe. It is good to have some gold in your portfolio (some virtual and physical.) As far as asset allocation, that is up to you. Gold is rather portable, and unless secured it can be stolen, or in a fire, melt through it may be found after the fire.
So is cash better?
Maybe. It is something you need to have on hand, but I would not hold too much cash in a bank account (or at least something you are okay losing.) Cash in a home or “under the mattress” is worth very little and the value decreases every minute it is in your possession. It is best to invest it in a liquid fund that earns interest (like a money market fund which is paying more than 4% per annum at this time.) You can liquidate a portion or all of your shares in a matter of minutes or days, and can use it in an emergency.
As the dollar value plummets, gold prices tend to rise. Also, as inflation rises, so do gold prices.
If you don’t have any gold today, I would get what you can afford to buy. Buy an ounce every year would be a good example, especially when the prices dip quite a bit from the recent highs. Don’t trade it, but own it. If you haven’t heard, Costco and Walmart now sells gold bars which makes it easier to buy these days.