Gold is used as an inflation hedge in inflationary times, but aren’t there other investment assets that outperform gold? Experts’ answers to this question and their predictions for gold cryptocoin.com We have prepared for our readers.
“Gold can go up and down, but it won’t fall off a cliff”
“A golden hedge means an insurance policy. We shouldn’t expect it to be the best-performing asset,” said Adrian Day, Head of Wealth Management, noting that there are other commodities that performed better and that oil, real estate, and some stocks outperformed gold.
Lobo Tiggre, Editor of The Independent Speculator and Day and Portfolio Manager of EuroPacific Capital Gold Fund, disagrees with Adrian Day, who emphasizes that gold is the best investment against inflation. Lobo Tiggre explains his view this way:
I am against monetary metals for the balance between liquidity and inflation protection. Stocks are very liquid, but if you’re buying them as an inflation hedge and a stock market crash happens, you could face a significant loss of capital gains as soon as you need the funds. The same can happen to Bitcoin. Gold can certainly go up and down, but it doesn’t fall off cliffs like that. Not often and not for long.
Can the Fed handle inflation?
Speaking of inflation, both Lobo Tiggre and Adrian Day agree that inflation is very serious. “One of the most dangerous things about inflation is that it destroys the purchasing power of money and the purchasing power of savings, which of course leads to investment,” says Adrian Day, adding:
The sneakiest thing about inflation is that it hurts most people who do the right thing. For example, people who save money and buy their own house. In the most extreme cases, inflation destroys the middle class, causes social upheaval, and can even lead to war.
Lobo Tiggre criticizes the Federal Reserve and mainstream economists for underestimating inflation risks. “These roofs are making up as they go. None of these scumbags know what they’re doing,” says Lobo Tiggre, referring to Jerome Powell’s statement that we’re in uncharted waters:
I’ll thank Powell for saying that, but then I have to go and slap him on the head for saying, ‘Don’t worry. Because we have vehicles, it’s under our control. We can deal with it. How do you know your tools will work if you’re in uncharted waters?
“We have seen many geopolitical events where gold and dollar rise together”
Adrian Day and Lobo Tiggre discuss how the conflict between Russia and Ukraine has affected commodities. “I advise investors to buy monetary assets, not commodities, due to the risk situation in Ukraine and Russia at the moment,” says Adrian Day.
Other things being equal, a higher dollar means a drop in the price of gold. However, we have seen many geopolitical events in the past where the dollar and gold have risen together.
“These geopolitical tensions tend to have a flare in the pan,” says Lobo Tiggre, reminding that the last time Russia took over much of Ukraine, it flooded and faded a few months later, and everything, including the price of gold, returned to its old trend. Regarding portfolio allocation, Lobo Tiggre says:
I think it was a mistake to completely redefine your portfolio and allocations because of the Ukraine-Russia conflict.
What should be the choice to be protected from inflation?
Adrian Day points out that it’s crucial to liquidate when markets are down to protect yourself from inflation. Adrian Day’s position advice includes:
They go overboard and even borrow money to buy those shares. This is the worst possible position to invest. When you’re in the right industry at the right time, but something goes wrong, like facing a margin call later on, and then you need to withdraw the money. And this happens 9 out of 10.
Lobo Tiggre talks about the idea of having a fixed loan interest to hedge against inflation. According to Portfolio Manager, the problem is what happens if inflation is lower than you expected. Lobo Tiggre details his views as follows:
Now you have this debt at a higher rate than you think. As a result, there is no silver bullet here. Don’t be too clever. This brings me back to my favorite balance of risk and reward for long-term wealth preservation, not momentary volatility. I like monetary metals. I prefer gold to silver as it does not tarnish. More compact and convenient.
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