Gold as a Hedge Against the Dollar
by Admin
Posted on 18-10-2023 12:28 PM
There are plenty of pros and cons to consider, irrespective of how you invest in gold.
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Advocates of gold investment see the asset as a useful diversifier when many others are correlated. “it is often said investing in gold helps fight inflation,” adds morgan. “in contrast to paper currencies such as the pound or the dollar, which can lose their spending power over
time
as more are created, there is a finite supply of gold. Only a small amount is added to the supply each year from mining. ”samuel mather-holgate, an adviser at mather and murray financial, says gold has been an intrinsic store of value for centuries – making it a useful hedge against inflation – and a go-to asset in uncertain times.
Liquidity. Gold can be easily converted into cash anywhere in the world. Aside from actual cash, the liquidity and universality of gold is unparalleled. Holds its value. Gold tends to maintain its value over time. Economists argue that even the price of gold is not indicative of its value. That is, even if the price decreases, the underlying value of gold does not change much. This is largely because there is a fixed quantity of gold due to the fact that it is a commodity, whereas the u. S. Dollar, which is a form of fiat currency, holds no inherent value.
Why is gold important? for a relatively small asset class, gold gets a lot of attention. The reason is that gold has become established as a type of “anti-money”. It is viewed as the opposite of fiat currencies like the us dollar and euro. The primary reason for this is the fact that supply is limited, while the supply of fiat money is theoretically unlimited. Every year the amount of “above ground” gold increases by just 1. 5%. That number is likely to fall in the future as below ground reserves are decreasing by as much as 5% a year.
Gold historically retains its value over the long term. Mostly, people invest in gold as a hedge against inflation and downturns in the value of paper currency. Most gold bullion coins are recognised as legal tender, making them an ideal inflation hedge that is relatively liquid. Unlike real estate, using gold as an investment lets you offload the bullion rather quickly when you need fast cash. Buying gold and silver bullion and gold coins is also a way to protect yourself from deflationary market action. Unlike inflation, deflation is rare, but devastating when it happens. The great depression of the 30s was a deflationary depression, where prices decreased, but business activity slowed, and the economy was hampered by excessive debt.
Gold as a Safe Haven
The gold price could surge 20% as the precious metal will keep its inflation hedge status, according to byron wien, vice chairman of blackstone's private wealth solutions business, and chief investment strategist joe zidle. “the price of gold rallies by 20% to a new record high. Despite strong growth in the u. S. , investors seek the perceived safety and inflation hedge of gold amidst rising prices and volatility.
Gold reclaims its title as a haven for newly minted billionaires, even as cryptocurrencies continue to gain market share," wien and zidle said in a note.
March 23, 2022 since russia’s invasion of ukraine, many gold dealers around the world have seen their sales going up to the sky, as savers and investors rushed back to gold, the safe-haven asset in times of wars and geopolitical crises. Growing investor interest pushed the price of gold above to the record it reached during the covid pandemic, and made many of us wonder if gold might be a good investment in 2022. Gold is one of the earliest traded assets, existing long before stock markets. Long time considered as a sign of divine power, gold was worn by kings and pharaohs for thousands of years, to demonstrate their strength and status.