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Saving in Gold vs. Saving in Cash

We all know that growing your nest egg is critical for any successful long-term investment plan. We also know that our choice of investment product accounts will make significant differences to our final balance. But how much difference does it make?

In the graph below, we’ve plotted the outcome that an everyday Australian would have achieved had they started saving back in 1999, and chosen to put:

  • $100 a month into physical gold, which they kept to this date
  • $100 a month into short-term deposits, which they have consistently rolled over to this date.

Over this 17-year plus period, this individual would have invested a total of $20,500 into both gold and short-term deposits. The money invested in the short-term deposits would of course have increased due to the interest payments, with the investor accruing a final balance in their bank account of almost $28,000.

This is not necessarily a bad return, but as you can see from the chart below, the money invested in gold would have been far more profitable. The current value of all the gold they’d accumulated would be worth almost $38,500, based on an end December 2016 gold price just below AUD $1,600 per troy ounce.

From a return perspective, that is almost double the amount that was invested, and a far better outcome relative to the savings that were placed in a traditional bank account.

Source: Returns are gross of fees. Gold prices in AUD from the World Gold Council, Cash returns are from the 3-month retail $10,000 Term Deposits from the RBA.

Note: This does not consider income tax for the money rolled over in term deposits, nor the capital gains that would be due upon sale of the physical gold. Whilst everyone’s tax circumstances are unique, we can reasonably say that the post tax results of saving in gold would be even more favourable relative to a traditional bank account.