How To Buy Gold To Hedge Against Inflation

By Jason Markum

Well, we certainly live in interesting times, which I guess is a pretty good thing! On the other hand, we also live in inflationary times which can be devastating to those of us who are responsible savers. Why is that? Because all of the hard earned money that we have scrupulously saved year after year is suddenly not worth as much as it used to be because of the (some might say) irresponsible government policies that have led to massive printing of new money… which always has and always will create massive inflation.

But, being the responsible investors that we are, there are steps that we can take to save ourselves from the ravages of the monster that is inflation. Historically speaking, one of the best hedges against inflation is to purchase gold.

But then the question becomes… how do you purchase gold? There are many different ways to do it some are complicated and some are not so complicated, so which ones are the best? That’s exactly what I’m going to talk about in this article today.

Like I said, there are several ways to buy Gold; you can buy gold coins, you can buy Gold certificates, you can buy gold mining stocks, and you can buy mutual funds that invest in almost unlimited different mixes of each of those methods.

First let’s talk about coins. Many people like to own gold coins because they are physical, you can hold them in your hand, and you can stash them and be sure that you can get your hands on them in times of need… in short, they make you feel good. Some of the best gold coins to buy are the Mexican Gold Peso and the Austrian gold crown because the prices of those coins closely reflect their gold content.

What you want to stay away from are collectors coins such as the American eagle because those coins fluctuate in price based not on their gold content but instead on the collectors value of the coin itself. Those sorts of things are okay to invest in, but not as a hedge against inflation.

Another way to invest in gold is to purchase stock in companies that mine for gold or companies that sell equipment to companies that mine for gold. There are many different companies located in many different parts of the world including America and South America and South Africa and even China. These stocks are more risky than gold in that their value is tied to the performance of the company. Not all mining companies strike gold and sometimes even when they do strike gold it becomes prohibitively expensive to dig the gold out. So you really want to do your homework when it comes to investing in these companies.

Another way to own the benefits of gold is to buy shares of a gold index fund that attempts to simulate the price of gold and is often backed by gold. Many investors like this sort of thing because it’s so easy and because you don’t have to physically store the gold yourself and thus incur the cost of storage. But the fact of the matter is; you own shares that mimic gold, not the gold itself.

Finally you can invest in mutual funds that themselves focus on gold in various forms. Some mutual funds own gold outright, some invest in mining stocks, some invest in index funds, and some invest in a variety of all three simultaneously. Again these may be good investments but they aren’t the same as physically owning gold as a hedge.

So there you have several ways to own gold to hedge against inflation. The sooner you add some gold to your portfolio the easier you will sleep at night! Though it is fun to live in interesting times…

You May Find These Links Interesting:

How To Buy Gold To Hedge Against Inflation

Site Menu