Is it smart to convert cash gold?

Gold could be better than cash at preserving long-term wealth. Interest rates remain low, meaning that your money in the bank “earns practically nothing,” CNN Money reports. If inflation is taken into account, the value of cash could decrease over time. The point here is that gold isn't always a good investment.

The best time to invest in almost any asset is when there is negative sentiment and the asset is cheap, providing substantial upward potential when it returns to favor, as stated above. One of the most entrenched myths about modern currency is that it is backed by the U.S. UU. In other words, you can exchange your US dollars to the United States Government for the amount equivalent to gold bars at any time.

At one point in time, this happened with most of the world's paper currencies. It eliminated government support for the dollar with a real supply of gold (known as abandoning the gold standard) in 1971, and all major international currencies did the same. The only reason a dollar, a franc or a euro have any value is because we have a stable system in which people are known to accept these pieces of paper in exchange for something valuable. Or, as Nobel Prize-winning economist Milton Friedman says, green books have value because everyone thinks they have value.

The other great advantage of owning an ETF instead of ingots is that it can be more easily exchanged for cash at the market price. You can trade with the fund any day when the market is open at the current price, just like if you were selling a stock. Therefore, gold ETFs are more liquid than physical gold and you can trade them from the comfort of your home. Read more › Gold could be better than cash at preserving long-term wealth.

There aren't many alternatives to liquid money except gold, and since gold is still very attractive relative to cash, I think buying gold is the right thing to do.