Personal Finance/Wealth Management

Is It Worth Investing In Gold During Inflation?

Let us examine the reasons why it might make sense to invest in gold, particularly in times of economic volatility

The whole world is going through a period of high economic downturn. Some allude to this downturn in the war in Ukraine, but if we are going, to be honest with ourselves, there has been economic volatility since the COVID-19 pandemic. COVID brought the world economy to a standstill at a time, not only causing economic problems in homes but also affecting people's mental health, causing depression and anxiety.

I was not born during the previous pandemic caused by the Spanish flu, (1918), but I read how it took a very long time for people to recover and for the world economy to bounce back. Similarly, the so-called wise ones might be looking for ways to negate the present inflation and protect their wealth.

A Brief History Of People’s Interest In Gold

Gold has been mostly used as a standard of wealth by most countries since time immemorial. At a time, it was used along with silver as currency.

Around 1972. the USA tried to control the price of gold by linking its price to US dollars. Consequently, US dollars have become the main currency held by other governments because they are the only currency backed by gold.

Nearly all the world’s gold—about 90% — has been mined since the California Gold Rush of the 1850s. The WGC (World Gold Council) says that half of the gold mined over the last decade has been made into jewellery. Just over a quarter was turned into bars and coins, while the remainder was used in technology and gold reserves for investment purposes.

In the UK, the Royal Mint, in South Wales, produces all of the UK’s gold currency including bullion bars and coins.

As people begin to lose interest in stock and shares, they turn their interest to gold in preserving wealth. South Africa, being the largest producer of gold invented THE KRUGERRAND, a gold coin specifically for investment purposes.

Today, other countries have issued similar coins. In the UK, we have Britainia coins comprising gold, platinum and silver coins.

3 Main Reasons Why Investors Consider Gold

Portfolio Diversity — It is known that it is a wise decision to spread one’s portfolio over a wide range of stakes. Other forms of investments like property, bonds, stocks and shares are equally being affected by economic volatility. The notion is that they cannot all be behaving poorly, so the loss in one will negate the gain of another.

A Place Of Safety — The value of gold is basically a supply-and-demand thing and has nothing to do with the issuing country's economic situation. However, the demand tends to fall when people’s purchasing power is reduced, and vice versa.

Wealth Management — In times of high inflation, the real wealth, especially in cash is reduced by inflation. This is not the same as wealth held in gold. For one reason or the other, the value of gold tends to rise and rise, as demand is always high too.

‘Investing in gold is one of the wisest decisions that you can make as an investor.’ Fabrizio Moreira

How You Can Invest In Gold

Bullion — This is a gold bar and coins, usually sold in weight of the gold content, ounces and kilo. The coins are usually issued mainly for investment purposes by the government of the country. Owning bullion is an investment in physical gold.

Collectors’ Coin — this s where gold coins are issued for specific events, as in The late Queen Platinum Jubilee. The King Charles III coin is now available for interested investors. Collectors’ coins can carry numismatic value (based on scarcity) as well as real value.

ETFs — This is an exchange-traded fund of gold. This is another way of investing in gold without owning a bar of physical gold. You can invest in gold ETFs and profit from the price changes in the gold market, very similar to the stock exchange.

Stocks & Shares — You can also invest in stocks and shares of corporations, mining and dealing in gold. The performance is like all other corporate stocks and shares.

If you are interested in taking it further, you can download your free gold investment guide for 2023 here. (Not an affiliate link).

Another related article by the same author:

The Takeaways

• Gold as a form of currency as well as a standard of wealth, gold was the basis upon which the global economy as we know it stands today.
• There is no culture or era where gold does not have a high value.
• ‘In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value.’ Alan Greenspan
• ‘In these times of uncertainty for paper-based currency, I feel more secure in holding gold.’ John Paulson

DISCLAIMER

Although great research has gone into this post to give the true and genuine substance to it, nevertheless it does not still represent professional advice in any way. It is therefore given for readers’ interest and entertainment only. Thank you.😑

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