Gold works very well as an investment method in the face of a present inflation threat. A good portfolio from a smart investor includes gold as protection against high inflation and any adverse events.
It is worth noting the fact that gold, in any case, represents an extremely valuable asset. And that it also reacts strongly and without complications in the face of high inflation. It is precisely this point that is so attractive to investors today. Inflation is a condition that can bring down all investments made in a certain time.
It is very difficult to recover from it; even a country finds it difficult to stand up if it falls into the phenomena of inflation. Worse still, if you hit hyperinflation. The curious thing is that gold is not affected by these two factors; on the contrary, it remains very stable. It can even go up, whatever the economic situation of a country.
Therefore, it is a viable option for any investor and fosters the foundations for a sustainable economy.
Why invest in gold?
– Protects you against inflation or a threat to it that may exist.
– Protects you against problems that may threaten a particular currency or the banking system
– Gold is represented as others, as an asset. This is not a promise to the investor, but it can be physically controlled. So it would be the last resort asset.
Now it is important to highlight at this point how gold protects from inflation:
According to what the market considers, if, in this case, you are printing too many coins. Then the value of gold will rise. This is due to the reaction in people, who will want to exchange their currency for gold, and thus protect their purchasing power.
And this, considering that in the world there is a much greater quantity of traditional currencies than gold. Therefore, people will be buying gold under considerable offers, as a way to protect their investments.
A person who does not have enough purchasing power to buy a large quantity of this metal can do it gradually. In this way, and at your own pace, you will be using the currency to invest in grams of gold gradually.
The value of gold is not tied to that of the traditional currency; it remains more stable. So we should not worry that this affects our investments since inflation does not enter here.
Can increase the gold value?
The value of gold can increase if:
– Too many people want to buy it at once
– This generally occurs if there is high inflation, since, as we have said, gold is a method of protection.
– Gold acts as a “leveraged investment.”
– Gold prices may also rise in sectors with an inflationary tendency
With this trend investing in gold can be profitable in the long run, no matter if we do it gradually or all at once.
How gold is protected from purchasing power?
Also, if we decide to invest in gold, it is necessary to know how it is protected from purchasing power:
– This does not change over time, nor can a government print it in excess as it happens with traditional currency.
– It is immune to the devaluation that paper currencies constantly suffer.
– Gold does not accumulate massive debts
– Gold has value by itself
Gold has a long history of preserving wealth. Thus, it is difficult to think that a country with vast gold wealth falls on issues with hyperinflation. However, they exist.
In an investor portfolio, gold can help cover losses that may arise from paper money. Serious problems in the banking system can affect these markets. Gold would withstand shock and help with any crisis.
There is even the absurd belief that people take it into account when there are very evident crisis peaks. Unfortunately, this has been the reputation it has taken. If you were serious about the value and protection this metal brings to the economy, you would not be overlooked. But doubts about it still exist, on a smaller scale but there are.
The performance of gold in recent years has shown that a portfolio can survive on it for a long time. However, some economists expose their reservations regarding investment in gold and abstain.
Additional data on gold and its sustainability over time
– The beliefs that arise about gold come from the 70s when only this metal was able to generate sustainability. All this on a portfolio poorly managed by inflation. Gold managed to keep it afloat.
– In 2000, gold was again the only investment that generated decent profits in a diversified portfolio.
So a diversified portfolio with various methods for investors can lead you to find the economic sustainability you want. The future is not predictable, so we must be prepared for anything and bear any blow.
Not, for this reason, we must invest 100% in a single asset; this would be very risky. So this is what we mean by “diversity.” So finally, the bottom line is that it is profitable to invest in gold in the long or short term. But even more so is maintaining the diversity of investments.