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Russia's invasion of Ukraine showed that Gold is still king

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Written by   34
2 months ago
Topics: Gold, Russia, Blog, Life

If there’s one thing we can all learn to form the financial sanctions against Russia, it’s how quickly cash can become useless, the access to our money restricted, and how easily central banks, will confiscate your money and convert it to whatever works best for them. These three things happened to many Russian citizens, in a matter of days and it’s a clear example, of just how important it is, to not only have a foreign bank account but to also hold physical assets.

Because when you hold physical assets, a bank can not decide for you, to convert these assets, at a very unfavorable rate and they also can’t prevent you, from accessing those same assets. An added benefit from holding physical assets is that you can actually transport these more easily, than the same value in cash, or when it’s in the form of real estate, it’s already at the location you want to have it. Now many people think, that having physical assets, is only reserved for the ultra-wealthy, that have millions or billions of dollars in wealth, and that what's happening in Russia is never going to happen in the West.

Things like this can easily happen in western countries as well and I have personally witnessed a bank run happening in the Netherlands when the CEO of the DSB bank mismanaged the company and around 400,000 people lost access to their funds. They did this to prevent a complete collapse of the bank, however, in the end, it didn’t work and the bank still collapsed anyways. So you see, losing access to your bank account whether it’s due to financial sanctions, global financial crises like in 2008, or simply mismanagement of the company, will always hit average people the hardest since they usually have all their funds in one bank or in one country. Now there’s an easy way to protect yourself from this problem and that is by buying physical assets there are several to choose from.

The first and most well-known one is buying physical gold. Now, this might seem challenging and costly at first, however, you should know, that you don’t have to start with buying massive 400 troy ounces gold bars, as you see in the movies. These bars are usually the standard for big banks and weigh over 12 kg or 27 pounds, which makes sense when you’re buying billions of dollars worth of gold. However, when you are buying gold as a private citizen, you can easily get started with as little as 1 ounce or even just 1 gram, of which there are about 28.3 in a single ounce or 31.1 grams in a troy ounce, which is the standard in the gold market and dates back to middle ages.

historical gold price, goldprice.org

Now the main reason for buying physical gold, that we focus on in this particular case, is the ability to always have access to your funds, however, there’s a major added benefit from holding physical gold, which is that’s actually a great long term investment and a good hedge against investment risks. When you look at gold, over the past 20 years, your will find, that it has a very nice return on your investment and that it’s on par with most S&P 500 ETFs and thus a very safe place to put your cash. So when buying physical gold you get the benefits of having your funds grow over time and the added benefit of being able to transport them with you, to wherever you want, which means that you’ll never be denied access to your own funds.

historical silver price, look at that peaks, silverprice.org

Another great physical asset to have is silver, for which the same principles apply to gold. The main difference is that silver tends to pull back harder than gold, which means that after large price increases, it can have large declines and this means that the long-term growth of silver is a bit more dampened, than that of gold. Over a long enough time period, you’re still going to enjoy a huge return on investment, making it a much better alternative than holding cash and giving you all the benefits of having a physical asset. When deciding on whether to buy gold or silver, it all depends on the market forces at play, at the time of purchase, since sometimes it might be better to buy silver, when the silver market is down a lot and when the silver market has enjoyed a rapid increase, it might be more sensible to buy gold.

Next to precious metals, real estate is also a well-known physical asset, that private citizens can buy, however, this is usually done for the purpose of investing locally and then renting out the place for some added income. In our case, we're looking at real estate for the purpose of safeguarding your funds and getting them out of a bad economic region, which means that local purchase is out of the question, since this would not benefit you when you need to leave the country.In addition to this, buying the real estate where you already live, becomes even more problematic if you are leaving for economic reasons, since at that point the property, has most likely lost a lot of value, and finding a buyer might be very difficult.

Dow Jones U.S. Real Estate Index, spsglobal

For these reasons it makes much more sense, to start buying real estate overseas, in places where you might want to move to. This will allow you to have assets in a foreign country, outside the scope of your local bank or government and it has the added benefit of serving as a place to live, for when you have to leave. Just like gold and silver, real estate has a tendency to appreciate over time, making it a much better alternative than holding cash in a foreign bank account. Now the sanctions against Russia, demonstrate all these benefits perfectly.

Many Russians fled to Georgia and Finland, however even though they had the funds, to rent or buy a place, a lot of Russians still struggled with finding housing or even with simple things, like opening a bank account, due to the sudden influx of so many Russians. This shows, that it’s important to take care of all of this, long before you actually need it. So again, just as with buying physical gold, you don’t have to be rich to start buying real estate overseas. In most non-Western countries you can easily buy property for less than $90,000 and even in most western European countries, you can still find houses for less than $150,000, if you stay away from major cities, such as Paris and Madrid.

Now the point here isn't to get filthy rich or make the best possible investment with your money, it's to make sure you have access to your money when problems arise. When you own property in a foreign country, you can also sell this when you are in need of cash, since the money will get deposited in your foreign account one that is free from a bank run or economic collapse. If you have $100,000 dollars sitting in an investment account, but the stock market is closed due to economic collapse, you can’t get your money out and if the banks are preventing you from transferring your money, then the money is completely useless. However when you hold these physical assets, you can easily transfer these to a location of your choosing and when you also own property there, it makes it very easy to relocate and finance your life, with your physical assets until your digital assets are available again.

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Written by   34
2 months ago
Topics: Gold, Russia, Blog, Life
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