Why using cryptocurrencies instead of gold may be a costly mistake

It is possible that seeing cryptocurrencies as “digital gold” is a mistake.

George Milling-Stanley of State Street Global Advisors, whose business manages the world’s largest gold exchange-traded fund, feels Bitcoin is no replacement for the real thing owing to its sensitivity to massive losses.

“Volatility does not back up any claims for cryptocurrency to be a long-term strategic asset as a competitor to gold,” the firm’s senior gold strategist told CNBC’s “ETF Edge” earlier this week.

SPDR Gold Shares, the world’s biggest physically backed gold ETF, is managed by Milling-Stanley’s business. According to the company’s website, it has a total asset worth more than $57 billion as of last week. As of Friday’s market closing, the ETF was up 7% year to date.

Milling-Stanley argues that gold’s 6,000-year history as a monetary asset provides a large sample size for understanding the benefits of investing in gold.

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“Gold is an inflation hedge.” Gold is a hedge against probable equities market downturn. “Gold is a hedge against potential dollar weakness,” he said. “Historically, the promise of gold for investors has… helped to enhance the returns of a properly balanced portfolio, in my opinion.”

This year, the precious gold is struggling to keep over $2,000 per ounce. However, Milling-Stanley feels that the economic background is favorable for gold, recession, or no recession.

“It’s clear that we’re going to be in a period of slow growth.” “Gold has always performed well during periods of slower growth,” Milling-Stanley added.

The key Fed inflation rate has dropped to its lowest yearly level in nearly two years.

Milling-Stanley also believes that China’s easing of Covid-19 limits will increase demand for gold. According to the World Gold Council, it is the world’s second-largest purchaser of gold jewelry after India.

“Not just China and India are involved. Vietnam, Indonesia, Thailand, and Korea are among them. “The main drivers of gold jewelry demand are a slew of Asian countries,” Milling-Stanley explained.

Friday’s gold price was $1,960.47 per ounce. This year, the commodity has gained more than 7%.

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