Is investing in gold worth considering during high inflation?

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Is investing in gold worth considering during high inflation?

Is investing in gold worth considering during high inflation
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Highlights:

  • While fiat money usually tends to lose value over long periods, the same might not be said with gold
  • Apart from owning actual gold – bullion or coin – gold mutual funds and ETFs might be looked at
  • Stocks of gold miners may help diversify certain portfolios

Gold has been a popular investment tool for millennia and it continues to be so today. While its utility as a currency exchange may be archaic, it has stood the test of time despite the proliferation of paper money, plastic money and now, cryptocurrency.

One reason this may be so is because of a widely held belief that it may be a good hedge against inflation. While fiat money usually tends to lose value over long periods, the same might not be said with gold. Perhaps, this is the reason it has been a favored instrument of familial wealth over generations.

Understandably, in a world of exorbitant inflation and its consequent likely interest rate hikes, geopolitical uncertainties that could cause fiat currencies to swing erratically and seemingly bearish sentiment among the stock markets, gold may find takers. So, the argument that it is little more than a substance to make jewelry may prove moot. 

Apart from owning actual gold – bullion or coin – gold mutual funds and ETFs might be looked at. Stocks of gold miners may help diversify certain portfolios.

Also read: Barrick (ABX) & Equinox soar (EQX): 2 TSX gold stock for the kitty

During times of inflation, it might sometimes seems like gold is competing with treasury bonds. Reportedly, some research has found that a majority of gold buyers tend to buy when its price is near a peak.

This does not seem like an ideal way to book a profit. Treasury bonds on the other hand have a fixed-rate of return. 

Also read: Barrick Gold (ABX) & Franco (FNV): 2 top TSX gold stocks to watch

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Bottom line

Today, there seems to be a large difference in the price of the amount of gold in a piece of jewelry and the trinket’s actual price once the artisan’s fee and the brand’s value is factored in. So, while investing in jewelry may not be the future, gold still has its takers and its redundancy as an investment asset doesn’t seem near.

Also read: Barrick (ABX) and New Found (NFG): 2 Canadian gold stocks to buy 

Gold has been a popular investment tool for millennia and it continues to be so today. While its utility as a currency exchange may be archaic, it has stood the test of time despite the proliferation of paper money, plastic money and now, cryptocurrency.

One reason this may be so is because of a widely held belief that it may be a good hedge against inflation. While fiat money usually tends to lose value over long periods, the same might not be said with gold. Perhaps, this is the reason it has been a favored instrument of familial wealth over generations.

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