Gold has been utilized as a store of value for thousands of years. Gold is considered by many as the best way to protect against the regressive effects of inflation. Here are several reasons why.
1. The Cost To Produce
Gold is a tangible asset and there is a cost to produce a tangible asset. When inflation rises, the costs of employee wages, energy, and equipment rises, and this is why the value of gold continues to rise with inflation over time. This is why investors utilize gold as a hedge against inflation. When the value of money decreases due to inflation, the value of gold increases, making it a reliable choice for investors looking to safeguard their wealth.
2. Physical Properties
Gold is attractive in color and brightness, durable to the point of virtual indestructability, and highly malleable. Gold does not react with oxygen and will not corrode over time. Gold is an excellent conductor of heat and electricity. One ounce of gold can be stretched into a wire 2000 kilometers long or beaten out to 300 square feet. Making gold an excellent alternative to fiat currency in exchange for goods and services.
3. Global Liquidity
Gold is recognized by central banks and governments alike as a store of value. Many sovereign mint coins, like the American gold Eagle coin, are legal tender designated. Individuals can exchange sovereign mint produced precious metal coins for goods, services, and fiat currencies anywhere in the world. Gold is the ultimate global currency.
4. Portfolio Insurance
Precious metals have a comparatively low or negative correlation when compared to stocks and paper assets. When the values of other assets decrease, precious metals will likely rise in value and promote portfolio balance and stability.
Precious metals are not prone to mismanagement or mishandling by corporations or government entities. Precious metals are not subject to government policy changes. For example, when you own a gold Eagle coin, no one can borrow or loan against your gold coin. Physical precious metals are free from the risk associated with debt.
FAQ: Your Key to Understanding!
