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Can Precious Metals Protect Your Wealth Against Inflation?

Inflation has always been and will continue to be a concern as time goes on for people across the globe. Therefore, it’s important to think about what you can do to remain financially stable and protected when it does occur or times become uncertain. You’ve worked hard to earn and properly manage your money and don’t want to see inflation be the cause of you having money problems and struggling to make ends meet. So, what can you do?

It’s safe to say that precious metals aren’t going anywhere and are often referred to as some of the best hedges against inflation. People continue to turn to precious metal investments during a national or world crisis. You may have heard this and are wondering if it’s a good idea for you. Given all this information, it’s worth taking a deeper dive into the question, can precious metals protect your wealth against inflation and if, yes, how so, and why.

What is Inflation?

First, it’s important to take a step back and address the question of what is inflation and why does it matter. Inflation happens when a given currency’s purchasing power begins to decline over time. A unit of currency can’t buy as much as it used to, as the cost of goods and services goes up. 

The exact price of services and goods will vary and not all will change in the same manner. Some may not be that noticeable while others may change a great deal. Therefore, the change is measured by the economy’s inflation rate. This is calculated by looking at the percentage change indicated in a country’s general price index.

There are a few primary causes of inflation that you should be aware of as well. These are as follows:

  • Government regulations
  • National debt management
  • Growing economy
  • Money supply expansion

Precious Metal Ownership & Inflation

The short answer is, yes, precious metal ownership can preserve wealth against inflation. The reason gold and silver, which are physical precious metals, are resistant to inflation unlike paper currency and stocks, is that their value is derived differently. The value of the dollar fluctuates and is dependent upon the actions of the Federal Reserve, central banks, global factors, and the general health of the economy, for instance.

You may want to consider investing in precious metals instead of stocks during inflation periods since they are considered a hedge against inflation. They are considered this for several reasons such as that they have intrinsic value, no credit risk, have a high level of liquidity, bring diversity to a portfolio, and there's’ an ease of purchasing. Gold has been known to increase in value as the purchasing power of the dollar declines which makes it a good investment when inflation is high.

Factors to Consider When Buying Gold or Silver

There are also several factors that you should consider when you decide to buy gold or buy silver. For example, Gold is VAT-free, while silver is not. Silver prices are typically more volatile and therefore silver is usually more relevant to someone who has a greater risk tolerance.

Furthermore, gold is more valuable per gram so it’s easy to conceal at home. Bulky, higher-value silver purchases may require storage solutions at home or through third-party providers. Profits made on the sale of UK gold and silver coins produced by The Royal Mint are Capital Gains Tax exempt. It’s also essential to note that bars provide the most cost-effective way to purchase gold and silver but profits are not CGT free.

Another factor to think through before you purchase gold or silver is the reputation and expertise of your bullion dealer. Also, understand the gold price or silver price or the actual cost per ounce of precious metals and the fees and/or commissions you’ll need to pay. Finally, arrange for a timely delivery of your precious metals so that you get them within a reasonable timeframe. Always be mindful that all investments come with risks so take the time to learn about the coins before you buy them. There are no guarantees and you should avoid making uninformed and quick purchases so that you don’t overpay.

Reasons to Invest in Precious Metals

Before you invest in precious metals, you may want to know some of the reasons why it’s a good idea. For starters, it’s a safe investment, especially during periods of inflation. They will not experience the kind of volatility as stocks and other investments. If you’re looking to invest in the future then precious metals are the way to go.

Another reason to invest in precious metals is that they’re a diversified investment. What this means is that they aren’t correlated with other asset classes. You’ll be reducing overall risk as well as better balancing your portfolio. They’re more secure than many other investments since you can store them in a safe place.

In addition, precious metals are a tangible asset that you can actually physically hold instead of just numbers on a screen. Therefore, they’re portable and can be easier to sell if you want to. Precious metals such as gold and silver are considered a limited resource since they can’t be destroyed or created. Gold is thought to be a good investment for anyone who’s looking to protect their money from inflation since gold tends to go up. Going forward, precious metals will likely become even rarer since more countries will begin to use them as a reserve currency.

Gold is also universally accepted and considered a currency all over the world. When the cost of living increases, the price of metal usually goes up so it is a hedge against inflation. You can always use precious metals to purchase goods and services as well. Finally, gold is a status symbol and tends to be associated with power and wealth. Gold and silver are beautiful and rare, and can also be used to make jewellery or other decorative items.  

Combating Inflation as A Consumer

As a consumer, you may also want to know more about how to protect and combat inflation. You may feel helpless or like there’s not much you can do as it relates to your job or wages. However, there are some ways you can take action and proactively protect yourself from the negative impact of inflation. To begin, you should consider securing stable investments such as precious metals which hedge against inflation. You may also want to spend some time learning how to invest in other stronger currencies.

The Impact of Inflation on Gold Prices

You may also be curious to know more about how inflation affects gold prices. The reality is that although it’s a safe investment and option that doesn’t mean inflation has no impact on gold prices. It’s considered a great hedge against inflation because if you were to chart gold vs. inflation, you would see a direct correlation between the price of gold going up and inflation due to the fact that gold is dollar-denominated.

Gold vs. Silver as Hedges Against Inflation

You may be contemplating if you’re going to buy gold, silver, or both during inflation to protect your wealth. Therefore, it’s wise to know how gold and silver compare and how well each hedge against inflation. The truth is they both hedge against inflation and the differences that exist are minor and not that noticeable.

Purchasing Precious Metals to Protect Your Wealth Against Inflation

If you’re interested in experiencing how precious metals can protect your wealth against inflation then consider buying gold or silver from us here at The Gold Bullion Company. We stock a wide range of gold bars and gold coins from all around the world. It doesn’t matter if you are new to investing in gold or you’re an experienced collector, our collections are suitable for anyone and everyone. In addition to our gold bullion offerings, we also have a large selection of silver bars and silver coins in all different sizes and various designs. Check out our site for more information about buying gold or silver and to see the prices live.

In Summary

There are many good reasons to invest in gold and silver, including that these precious metals can protect your wealth against inflation. They are not only a safe investment but also a diversified one and a limited resource as well as a tangible asset. Think about investing in precious metals if you want to grow your money over time and protect your money and wealth. While there are no guarantees with investments and all have risks, it’s safe to say that precious metals can help you protect your wealth against inflation and yield positive results.

Getting in Touch

If you have any questions about buying gold or silver or want to learn more about the purchasing process and paying for and tracking your delivery, then contact us today. We’d be happy to answer any questions you have and will ensure a smooth and positive experience when buying precious metals from our company.

We look forward to hearing from you and working with you soon!


Article Last Updated: Wednesday, July 6, 2022