During the current global coronavirus pandemic and resulting economic crisis, the uncertainty surrounding hyperinflation and bank default fears has raised the importance of harder and manipulation-resistant assets such as Bitcoin and precious metals. However, the root cause of this crisis may create unique problems for physical purchase of value such as gold due to the risk of transmitting viruses.
A similar drawback has been noted with physical cash. The chance of transmitting a virus through the exchange of paper cash is increases the more hands it changes, causing many businesses to go cashless during the pandemic to minimize potential exposure. The health risks of cash have already served as a marketing tool for digital payments providers in the cash-heavy legal cannabis industry.
Still, the global shutdown caused by the coronavirus panic has prompted many governments to issue stimulus plans and bailouts in an attempt to counter the economic crisis caused by businesses shutting down and workers losing their jobs. This has led to a bounce in the price of gold, although the same health concerns surrounding the use of physical cash could pose issues for precious metals as well.
Allocated gold’s advantages in a pandemic situation
During a global pandemic, transactions involving physical cash purchases are shunned in favor of digital payments due to the high risk of viral transmission from personal contact. Similarly, contact with physical gold may be deemed risky as well. Additionally, due to labor shortages from sickness, lockdowns, travel restrictions, and other factors, transporting gold may become prohibitively expensive, or completely infeasible. These factors can give the combination of allocated assets and cryptocurrencies the edge over precious metals by themselves.
There may be future crisis situations that favor physical gold at home, however. In the case of a disaster disrupting the electrical grid or global internet connectivity, cryptocurrencies may become difficult to access, move, and trade. In these cases, the ability to store and trade precious metals physically without any supporting technological infrastructure will cause them to trade at a significant premium over digital savings technologies including Bitcoin.
Either way, a well-diversified portfolio of scarce assets can increase the odds of preserving savings in a wide variety of situations.