Although the world is slowly recovering from the coronavirus pandemic, the economic consequences will not be felt for some time to come. You might be asking yourself how to keep savings from losing value. One of the main consequences will be high inflation, which is the general increase in the prices of various goods and services due to too much money in circulation.
In fact, inflation has already occurred in many markets, so in 2021. we can see a sharp increase in the prices of oil, real estate, as well as various commodities such as food, corn and other raw materials. Price growth has begun to shift to the prices of consumer goods that we all buy, and this trend will intensify.
Consequences of high inflation
In the event of higher inflation (and the U.S. is already recording more than 4%), those who will be most affected will be those who hold their wealth in the form of cash, either in cash or in bank accounts. Interest rates on bank deposits are historically low, so inflation will “eat up” the value of the bank deposits of millions of citizens month by month, whose money will be worth less and less. The price of gold is growing at an average rate of 8.3% per year!
How some react to this
To protect themselves from this, many are seeking salvation in investing in investment gold, which is known to be a good hedge against inflation, as the price of gold is growing at an average of about 8.3% per year – well above the rate of inflation. It is well known that the price of gold rises the most during times of crisis. A good example of this is the Great Recession, when the price rose by more than 200% in just a few years.
This is nothing new
Inflation is not really a new phenomenon, it always exists, only it is usually controlled by central banks. If we look at the price trends of many goods and services over the last 20 years, we can see that many of them have increased more than twice over that period and that wage growth has not followed them, as the attached table shows. As a result, many believe that real inflation is even higher than the official figures show.
While household spending on energy, food, health care and many other things rose more than wages, the price of gold rose much more, meaning that those who saved in gold rather than money got off best. The value of gold rose while the value of money fell, and this trend will continue in the future, but it will be much more pronounced because inflation will be more pronounced.
Why is gold a good countermeasure
Gold is therefore known in investment circles as a hedge against inflation. However, the current rise in the price of gold occurred in a period of relatively low inflation, while high inflation is expected in the coming period. In fact, this is already happening, which is confirmed by the fact that in the United States in May 2021, the highest annual inflation since the Great Recession was recorded – as much as 4.2%.
Inflation will certainly not stop, as 40% of all dollars in circulation have already been printed in the last year, and it is similar with the euro! The laws of economics state that an increase in the amount of money in circulation also leads to an increase in prices in the economy. Some analysts go a step further and announce the advent of hyperinflation, similar to what happened in Weimar Germany a hundred years ago, and one of them is Michael Burry, an analyst known for predicting the 2008 crisis.
How can you protect your property if inflation occurs?
Most of the citizens’ property is in two forms – real estate and money in bank accounts. Real estate is more or less resistant to inflation, since it is real property, but the money savings of citizens will be most affected by the general rise in prices. The reason is simple – if the amount of money you have stays the same and prices start to rise, your money will have less value than before and you will lose purchasing power. Investing in gold is therefore a more cost-effective savings for many, as gold is a real asset that is resistant to inflation, as history has shown.
How can you actually invest in gold?
Unfortunately, many are unfamiliar with the investment process so they never opt for it even though it is a cost-effective alternative to bank savings, but the good news is that investing in physical gold is actually very simple. There are several ways to invest in gold, but the most popular and easiest is buying gold in physical form, or investing in gold bars and gold coins. Buying physical gold is possible from precious metal dealers.
Advantages of investing in gold
– Completely tax free
– Average annual return of 8.3
– Independent of the financial system and foreclosures
– Extremely fast and worldwide valid investment
– Very small difference between buying and selling price
Gold bars and gold coins classified as investment gold are completely exempt from all taxes, including VAT and capital gains tax. This means that all returns from the investment remain solely with the investors and there is no financial obligation to the government if a profit is made, which is not the case with other forms of investment. But how do you make a profit from investing in gold in the first place, i.e. how do you monetize the gold you buy and turn it back into money you can spend? This is one of the most common questions investors have, and the answer is actually very simple.
Precious metals dealers offer gold buying services to their customers – the service of exchanging gold for cash at the current rate. Just as paper currencies change one by one in exchange offices, it is possible to exchange cash for gold and vice versa, and for each product the buying and selling price is transparently stated on the website, and these prices are automatically updated with the movement – exchange gold prices. This means that an investor can exchange their gold for cash at a fair price at any time, regardless of where the gold was purchased, and this makes this form of investment very liquid.
Always be prepared
Investing in gold is a good way to prepare for the coming inflation, because those who own gold and not just money will fare much better in such an economic environment. In order to protect against high inflation, gold must be obtained before a large price increase, because as soon as inflation rises sharply, the price of gold will also rise. This also happened in the last crisis, where those who invested in time were able to get returns of more than 200% in a few years, and with inflation coming, many analysts believe that this increase will be even higher.
No matter what the future holds, always be prepared. InvoiceCrowd can help you do that by offering a variety of services like invoicing, expense tracking, that will save you time and money.