How Inflation Impacts Gold

by Ava Medylene Lifestyle Blogger

Investors are apprehensive about the post pandemic situation. COVID 19 has resulted in big swings in the market. Economic forecasters are predicting a rise in inflation this year. Amidst inflation fear, investors seem to be turning to gold, silver and other precious metals as effective hedge assets.

Gold is known to perform strongly during financial crises in the past. The yellow metal has always been one of the most trusted assets of investors' portfolios for being relatively immune to inflation.

If we look at the past data, the gold prices have risen by around 360% from 1990 to 2020, which is a better performance than bonds and stocks. 

Understanding Inflation 

When every item sees a price hike and the value of the currency goes down, this is how one can understand inflation in the most simple terms. In other words, when the purchasing power of a currency drops, it is referred to as inflation. 

It impacts the buying capacity, savings account, bonds and other investment assets. Hyperinflation is even more damaging. 

The impact of inflation on Gold

Looking into the past data, we can see that gold, silver and other physical precious metals have been resistant to inflation. The case of paper currency and stocks is opposite to the precious metals as their value is derived differently.

The value of the paper currency depends on global factors, central banks, how the economy is performing and more such factors. When the economy requires a boost, currency can be printed and circulated, thus increasing the supply. This results in a lowering of the value of the currency as there is no increase in demand.

On the other hand, gold holds its value as it is a precious metal and it's also used in various industries. It has always been in demand for centuries. The aesthetic appeal of the yellow metal makes it the most sought-after metal for making jewellery.

Since ages gold coins have been collectors' favourite. Physical gold bars have always been a part of the portfolios of investors as safe haven. Since it's a highly conductive metal, it has many industrial uses too. In many cultures, gold is considered a sign of wealth.

All this implies that the demand for this precious metal will not go down anywhere in the foreseeable future. Gold's supply and demand are quite stable and its demand is continuous as it is required for making jewellery, coins, trophies and not to forget industrial usage.

To secure their wealth, investors turn to gold, silver and other precious metals during the time of economic uncertainty or recession. This increases the demand for these metals and in turn, their prices rise, making them an effective hedge against inflation.

This is the reason why gold, silver and other precious metals are preferred by investors to diversify their portfolios.

How to trade in Gold

If you are planning to diversify your portfolio, now is the best time to trade in gold as predicted by seasoned investors.

Central Bullion is a trustworthy platform where you can invest in pool allocated gold and silver bullion and enrich your portfolio.

The intuitive platform also offers a peer-to-peer Central Bullion market and makes it hassle free for investors to buy and sell gold and silver investment bullion.

There are tutorial videos, making it simple for the investors to understand how to trade in gold and manage their precious metal investments using the platform efficiently. 

Once you purchase the ownership of the gold investment bullion, it remains safe in the high security vaults and is fully insured. 

Investors also get the option to get Gold Bullion bars, which they own, safely delivered to them if they want.

Gold bars investment has never been so effortless.

The same is the case for the white metal, you can purchase the ownership of vaulted pool allocated silver bullion. And physical silver bullion bars will be delivered to your doorsteps whenever you require.

Key takeaway

Inflation can pose a risk to your portfolio. It can impact stocks, bonds and savings account. Savvy investors turn to gold, silver and other precious metals to immune their portfolio from inflation.

Gold prices saw a peak last year, making it a perfect asset for diversifying your portfolio this year. The yellow metal has always proven its worth as a safe haven in the long run.

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Created on Jul 12th 2021 11:03. Viewed 285 times.

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