Ever wondered whether to hold US dollars or invest in gold? This video makes the comparison easy and straightforward. I break down the pros and cons of holding USD versus buying and holding gold, considering various factors like saving with compound interest and taxes over time. Our simple explanations and clear comparisons help you understand which option might be best for your financial goals. Whether you’re a seasoned investor or new to the world of finance, this video is a must-watch for anyone looking to make informed decisions about their assets.
00:00 Which is the Better Investment? Gold or Dollars
00:28 Scenario 1 : Gold vs. Cash
01:40 Scenario 2 : Gold vs. Cash with a Savings Rate
02:30 Scenario 3 : Gold vs. Cash with a Savings Rate and Taxes
04:54 Can You Keep Gold with 0 Taxes
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I’m going to talk about gold and give you the simplest most straightforward way to explain how you compare gold to dollars you may see articles and hear people talk about how gold is an inflation hedge dollar has lost its value with relation to Gold what is that
All mean well I’ll go into some of the specifics of compounding interest and taxes and how you can pass along things like gold and pay no taxes but first the most simplest straightforward explanation is this a 100 years ago if you take a look at this article here
From uh Seeking Alpha they talk about the price of gold 100 years ago and how it was $20 an ounce okay so let’s just say for sake of argument or illustration purposes 100 years ago you had $100 and you put it under your mattress or scenario two you take the
$100 and you go buy gold Gold’s $20 an ounce that would be 5 ounces of gold you take your 5 ounces of gold shove it under the mattress here we are 100 years later what do you have scenario a you pull out your $100 bill you got
$100 scenario B you take your 5 ounces of gold you have 5 ounces of gold you want to turn it back into dollars so you go sell it currently the price of gold is $2,000 an ounce multiply that by your 5 oz that’s $110,000 so there you go when you hear
People talk about dollars verse gold and how gold is an inflation hedge that’s what they mean you have the scenario of either $100 or 10,000 gold wins okay I know you’re probably thinking there’s lots of ways to look at things with relation to opportunity cost so let’s
Talk about that $100 instead of putting under your mattress you put it to work in a savings account and you received a rate of interest you’ll see on this chart interest rates over that period of time have been all over the place but it looks like like just eyeballing it let’s
Say 4% interest over that period of time every year so your $100 compounded every year at 4% at the end of that 100 years you can see here in this calculator you would end up with $ 5,424 not bad that’s if you took your 100 put it in at 4% interest it
Compounded over time and you compare that to the gold which is at $110,000 Gold still wins but it’s not that simple because what about taxes and how do taxes work on your $100 invested at 4% every year you would pay taxes over this period of time taxes
Have gone up taxes have gone down let’s just say keep it simple that over that period of time it averaged about 25% in taxes each year the bank says you receive this much in interest you put it on your tax form you pay your 25% let’s compound that in this
Calculator later the $100 compounded at 4% while taking out a 25% tax rate over that period of time you would end up with $1,981 let’s just call it $2,000 what about gold well you can’t take your gold and invest it and have a rate of return your gold is just sitting
There so what’s it worth after this period of time it’s worth $10,000 we’ll hold on what about taxes well this is what’s interesting about a commodity like gold it might be rising in value every year but you’re not receiving a rate of return so you’re not
Paying taxes on it so now you’ve got essentially $2,000 when you invested your 100 at 4% and paid your taxes versus 10,000 now when you take that gold and you turn it into $110,000 you will have to pay taxes the long-term capital gains rate Peaks out at 20% right now so 20%
Of 10,000 is $2,000 so you would end up with 8,000 so if you paid the long-term capital gains you’d end up with $8,000 compare that to 2,000 gold still wins what if you didn’t get the long-term capital gains rate and you end up paying 28% federal taxes now
You’re going to end up with $792 after you pay your taxes on the gold when you converted it back so essentially you’re looking at $22,000 it’s been compounded you’ve paid your taxes that’s what you end up with when you invested that 100 versus the gold you s you sold it you converted it
To cash you paid the taxes at the highest rate you’re going to end up with about $88,000 so there you go you’ve got your 2,000 versus your 8,000 gold wins it gets even better as inheritance if you don’t convert the gold to cash and your sitting there with your 5 ounces of gold
And you don’t need it for whatever reason you don’t need to pay any bills you don’t need to convert it to cash you pass away and you pass it along to your heirs well they will pay taxes if they sell the gold now listen to this if you
Sold the gold your base would be $100 because that’s what you paid for it you sold it and got 10,000 so 10,000 -100 is $99,900 you pay taxes on on that gain but in inheritance their value doesn’t start at a 100 it starts at the value of the gold
When they received it the fair market value when they received the gold so if you pass along that gold it’s worth $10,000 they don’t pay taxes until they sell it but what’s the value of the gold to them the fair market value of when
They got it which is 2,000 an ounce 5 O $10,000 so your difference was 100 to 10,000 99,900 taxed their difference is 10,000 they turn around and sell it for 10,000 they’ve made no gain because their basis was the fair market value when they received it so one thing you
Can do with gold is keep it forever pass it along and as if no one’s ever taxed now if they held it and it went up in value of course they’d have to pay the difference of what they sold it for versus with fair market value when they
Received it so there you go I hope that helps that is the simplest explanation of how I can explain why they say gold is an inflation hedge and personally why I diversify whether it be crypto or gold or bonds or just cash at a a interest rate um or stocks stocks with dividends
Whatever I believe diversification is very important and I hold gold I hold silver crypto and all those other things you may want to consider that as well I’m not a financial adviser but I hope that helps explain why you may want to have gold in your portfolio thanks for watching