An element that we should not underestimate is the connection existing between gold and inflation. In fact, during times of inflation gold increases its value, but let’s take a deeper look into this topic.
What is inflation? Inflation is a general increase of prices and its increase over time represents the reduction in purchasing power.
As discussed in the previous articles, since gold is a store of value it is a smart choice to invest during hard times because it is the perfect way to protect your own asset. While during inflation currencies’ value tends to decrease, gold increases in value. This is due to its story of preserving its value in the long run and it can be considered the best way to protect your asset.
Considering the stock market, which appears mostly on the rise, if we link it with the inflation, it is possible to see how income for investors have decreased during times of high inflation, causing significant losses.
At this point gold comes into play showing its key role, because it resists the effects of inflation; this happens because there is scarcity of physical gold worldwide and its purchasing power remains almost unchanged over time.
Going back to one year ago, we assisted in the increase of 10% of the price of an ounce in less than 60 days. Why did this happen? We can consider the war conflict between Russia and Ukraine as the trigger, but in the last months of 2021 experts assumed that the reasons lied in the persistent inflation of the energy industry and primary commodities.
Also in this situation gold has proved to be extremely reliable in times of deep uncertainty in comparison to Bitcoins and crypto currencies that turned out to have lots of limits.
The expert Fortune Kevin Rich, consultant of global gold market of Perth Mint explained how gold would have been the main character and how it will be in this historical time: “The demand for gold will be higher as long as the world is in ruin and Ukraine will be still at war. If the Fed will not be able to stop inflation, the demand for gold as a shelter will be on the same level of the present”. For this reason it is important to diversify the portfolio for investors who are trying to reduce the risks of financial loss; diversifying is an important strategy for investors who want to improve their financial success. It is therefore essential to consult an expert before any investment.
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