Investing In Gold as a Hedge Against Inflation

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Investing In Gold as a Hedge Against Inflation

Gold has been used for centuries as a store of value and currency; it is precious metal with intrinsic value. It has unique properties that make it generally accepted as a safe haven investment for both government and individuals alike. 

The history of this precious metal is long and quite fascinating.  The first recorded account of the use of this precious metal was in 2,600BC in ancient Egypt. It was used to make religious artefacts, jewelleries and masks for the pharaohs’ burial.  It was also used by many ancient civilizations as currency. 

The 19th century gold rush in Australia and California led to great increase in its production and made it more available to a greater number of people. This led to what is known as the gold standard; this is the value of a currency that is tied to a certain amount of the precious metal. 

Check out this article for more fun and historical facts about this precious metal.

In this article, we will discuss gold as an investment but before we go on, let’s quickly examine some of the uses of this yellow metal. 

Uses of Gold

Although gold plays many important roles in the economy of many societies mainly as a store of value and currency, it also has practical value.  It has properties that make it very valuable in manufacturing.  These features are resistance to corrosion and high conductivity which are essential components in the manufacturing of computers, smart phones and other electronic devices. This precious metal is also used in medicine for some form of treatments.

How to Invest In Gold as a Hedge Against Inflation

Gold is used for so many things and in so many industries; time will fail us to enumerate and discuss all of them so below is a summary:- 

  1. It is used as a status symbol.
  2. Glass making 
  3. Jewelleries 
  4. Aerospace 
  5. Medicine 
  6. Aerospace 
  7. As currency and for investment 
  8. Electronics 
  9. Gold leaf 
  10. Dentistry 

As days go by, this precious metal keeps gaining popularity not just for its intrinsic value but for it practical uses. 

How to Invest In Gold 

Through the years, gold has retained its place as a reliable investment commodity. Whenever there is political or economic upheavals, investors always fall back on it as a safe haven. An example is the financial crisis of 2007-2008; the spot price of the commodity increased significantly because many investors used it to diversify their portfolio to protect their investment.

Seeing that this commodity is a wise investment step to take we will discuss 2 ways in which one can invest in it. 

ways to invest in gold against inflation

Buy Physical Gold 

The physical commodity is known as bullion and it may come in bars or coins. Some people find it emotionally satisfying to own gold; guess it makes them feel wealthy. However there are some downsides to this and that is the issue of storage and security. 

If you want to own the physical commodity as an investment, you need to understand what it takes to store it and have plans for its security. Also note that making profit from buying and selling this precious metal depends totally on its market price. 

All the above being said however, investment in this commodity is a great long term investment because it never depreciates. Like we said at the beginning, it is a hedge against inflation. Rather than depreciating, the value goes up when there is economic crisis. 

You can buy gold from dealers both online and offline but ensure that whoever you are buying from is a reputable dealer.  Check out for the purity level of the commodity because only gold with 99.5% purity is considered investment worthy. 

The bar must have the name of the manufacturer, the purity and the weight stamped on the face. This will let you know whether it is an investment worthy bar or not. You must also bear in mind that coins are not considered investment commodity, they are more of collectibles.

The dealer you buy from is very important and that is why you have to do your due diligence before committing your money or entering into any transaction. One of the ways you can do this research is by reading reviews on credible platforms.  You can visit https://www.bondsonline.com/barrick-gold-review-scam-or-legit/ for a start. Be sure to put in some time in this research as it can have some serious effect on your overall investment experience.

buy physical gold

Investing in Gold ETFs (Exchange Traded Funds)

Gold ETF is like mutual fund that is traded on the stock market. It is similar to mutual funds where people pool money to buy shares. The money in such cases is usually paid into an Asset Management Company that will in turn invest in the shares. 

The company then allots units of the shares to the investors and they can trade it on the stock exchange. That is the basics of conventional ETFs but the difference here is that in this case the assets are backed by gold. So the price of the asset is tied to the spot price of the commodity which brings together conventional investment in gold and the flexibility that comes with equity investment. 

So people who buy ETFs backed by this precious metal do not own the physical commodity but have it in an electronic format. This saves them the hassle of storage and security. Additionally, it is a cheaper option because one can get smaller units of shares whereas a bar of gold cannot be split into smaller units. 

Conclusion

We have discussed the important roles that this precious metal has played and still plays in our society. It has intrinsic values that attract both investors and collectors. 

We will round up by reminding us that no investment is risk free no matter how wonderful or profitable it is. Therefore, it is important that you start out by researching how you want to invest in the yellow metal and whether you have commensurate funds to start the investment. Also bear in mind that this line of investment is best as a long term investment.

Finally, find out how the aspect of the market you want to venture into works. In addition to your research, you will do well to consult a financial advisor or an expert in that field of investment so that you will not lose your investment. 

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