Gold Coins as a Hedge Against Inflation: How Does It Work?
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No matter how stable the economy of a country is, there is always some chance of a sudden upheaval. A good example of this is what happened in 2008. All the financial markets in the US sleepwalked into a fully fledged global crisis, at a time when almost no one expected it to happen.
In order to avoid losses when the economy goes a little off-balance, it’s essential to invest in options which will continue to yield returns even if the economic landscape isn’t very stable.
A good proposition is gold. Other than its varying uses as a precious jewel, gold is also a safe haven for investors; especially for those who wish to add it to their retirement plan. Let’s see how.
History
According to Reuters, the relationship between gold and inflation has been found to be weak in the past 50 years Whether it was the surge in oil prices in the 1970s or the inflationary regimes of the 90s, gold was the least affected commodity. Gold even maintained a steady increase in its value during the eurozone crisis. During the US economic crisis of 2008, gold prices were around $869, but they soared to $1895 in 2011. This is the time when all other investment commodities were trying to recover from the after-effects of the crisis.
How does it work?
Unlike the stock market, which works on the basis of speculation, gold derives its values from the market forces of supply and demand. Trends have shown that whenever the US dollar has depreciated in the past, investors have flocked towards investment options like gold.
Gold is known to have positive price elasticity. This means that as demand increases, so will its value. According to Investopedia, whenever more and more people resort to purchasing gold, its price goes up, irrespective of monetary policies. This means that even the lowering or raising of the Fed rate has no impact on how much value your gold coins will yield.
Does the demand for gold ever go down?
You’re probably wondering what causes gold’s supply to not go down, especially when it’s a finite, naturally occurring, resource, and no one can manufacture more of it.
The answer is simple; unlike other naturally occurring resources like coal and cotton, gold isn’t actually ‘consumed.’ Every ounce of gold which was ever mined is still here on earth, transferred from one person to another or from one form to another.
With supply that has remained constant but demand that always increases, the value which gold holds always rises.
If you add gold to your investment portfolio or retirement plan, you can always resell it in times of economic crisis for a higher value. If you’re looking for a reliable investment dealer, contact Orion Metal Exchange. We are a gold investment company which facilitates its customers to store gold and silver coins in their individual retirement accounts (IRAs) for future benefits. To get in touch, give us a call at 1-800-559-0088. You can also contact via our website.
