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Inflation is no longer hovering near 40-year highs as it was in mid-2022, but we are not back to normal yet. The latest inflation report released this week shows that the rate of inflation was 3.2% in Februaryup from 3.1% in January. Given the negative impact of stubborn inflation on the traditional currency, many investors are now looking for ways to protect their investments from erosion from rising prices. And a traditional one hedging against inflation is gold.
When inflation rises, the purchasing power of paper currencies inevitably declines. This makes gold, which carries no counterparty risk and cannot be inflated by central banks, an attractive investment for investors who want to keep their wealth. If you want to add some gold to your portfolio as an inflation hedgehowever, it is important to understand that there are multiple assets to choose from.
Learn more about how investing in gold can protect your portfolio here.
5 Gold Investments to Consider With Rising Inflation
It might be worth adding these gold assets to your investment portfolio now that inflation is on the rise:
Physical gold in bars
One of the most direct ways to invest in gold is through purchase physical bullion in the form of gold coins or bars. Possession of the actual metal provides stock of valuewhich is not tied to a particular currency or economy.
The downside is that you will need to securely store and insure your gold holdings, which can result in extra work and extra costs. But if you’re looking for a “crisis commodity” to settle on, physical bullion is as close as you can get to owning intrinsic, universally recognized wealth.
Explore your best gold IRA options online here.
Gold exchange traded funds
For a more liquid and convenient way to invest in gold, you can buy shares of an exchange-traded fund (ETF) that tracks the price of gold bullion. When you buy a gold ETF, each share represents ownership of actual physical gold bullion held by the fund.
Gold ETFs can be a smart option to consider as they provide exposure to gold prices without having to personally acquire and store bullion. They can be easily bought and sold just like stocks through any brokerage account. However, there are small annual costs charged by the funds that you may want to consider before going this route.
Gold Mining Stocks
Instead of investing directly in gold itself, you can gain upside exposure through leverage through buying shares of gold mining companies. When gold prices rise, miners’ profits and stock valuations tend to jump even higher. You also have the option of investing in gold mining ETFs to get broad exposure.
The appeal of buying gold stocks is the potential for higher returns, which is great in any economic environment, but can be especially useful at times when inflation devalues the dollar. However, these stocks also come with higher risk than simply owning physical gold or bullion ETFs, so keep that in mind as you narrow down your options.
Gold jewelry and collectibles
Outside of strictly investment purposes, gold jewelry and collectible gold coins can increase in value as inflation increases. While these purchases do not provide direct exposure to gold prices, the precious metal content gives them an inherent tangible value that helps preserve wealth over time.
And with inflation weighing on other assets, collectors tend to drive up valuations for rare, historic gold coins in particular. These types of gold investments can grow in numismatic value along with base metal prices, providing a unique potential stream of returns.
Gold Futures and Options
For advanced traders and hedgers, gold futures contracts provide a way to speculate on future price movements or lock in current prices. However, due to the complexity, leverage, and risk of loss associated with gold futures and options (outside of the initial investment), this gold investment option is generally best suited to very experienced, risk-tolerant traders who want to make leveraged bets on gold prices.
The bottom row
As always with any type of investment, it is important to understand your time horizon, risk tolerance and goals before allocating capital to gold. After all, there are a wide range of gold investments to choose from, and these factors will play a role in determining which one works best for you, especially during periods of high inflation. But no matter what gold asset you choose, when used wisely, gold can be an important part of a diversified portfolio, providing protection against the insidious effects of inflation.
