An inflation hedge is an investment that maintains or increases its value over time. Therefore, if inflation periods were to occur, the inflation hedge would provide protection against the depreciating currency. During inflation, the prices of goods and services go up due to an increase in supply of money in the economy.
Gold and other precious metals are viewed by majority of people as the ultimate hedge against inflation. Is this true? Many investors have concluded this is to be true. Today, inflation is running at twice the British government’s target. It is not surprising that gold has not lost its luster.
The Value of Gold
The World Gold Council did a research about the value of gold. They found out that gold has held its value over the long term when compared to other commodities. The relative price of oil and gold in the UK has remained almost constant over the past fifty years. Although the price of gold has risen over time both in dollars and pounds, if you were buying a barrel of oil with bullion, you would pay the same weight of gold as you would have done back in 1950.
Investing in gold in the UK will retain and probably increase your purchasing power over longer periods. Back in the city of Babylon, there were many rich men. These rich men were ranked by how much gold they had. It is thought that an ounce of gold bought three hundred and fifty loaves of bread in the time of Nebuchadnezzar. Today, an ounce of gold buys three hundred and fifty loaves. This shows that gold has proved to be an effective hedge against inflation for over 2000 years.
The current economic state in the UK shows why there is an increasing demand for gold. Investors define gold as an asset that offers inflation-proof returns. Wages are flat and interest rates are very low today. Many families are feeling the real impact of inflation. Their pensions and salaries are losing purchasing power every day. Savings are diminishing in value. Economists have reported that if inflation remains at its current rate, savings will have halved in approximately 15 years.
Due to these facts, it is not surprising to see people investing in gold in the UK. Its supply is limited (very small amounts of gold are mined each year), so this makes gold prices go up. With the Goldex app you can buy and sell gold at the best prices and make instant savings of 8-12% on all your trades. All in all, gold is the best protection against inflation. Investing in gold in the UK is the key to financial success today and in the future.