Hedging in gold to shield from economic downturn

By: HMB Gold

Global markets can be mercurial. Political issues, social upheaval, and even climate change can impact values and returns. And depending on the form and value of an asset, every investment comes with the risk of a complete loss.

Many smart investors feel that global issues and market volatility can impact currencies and affect the growth of their investments. However, historically, gold has withstood the test of time. It continues to emerge as one of the strongest soldiers against economic turmoil and has repeatedly proven to be a steady investment. It’s considered such a safe bet that some experts believe that hedging in gold investment can save you from the direct impacts of an economic collapse.

What is hedging in gold?

Hedging is a strategy of investing across varied assets to minimize the risk of losing returns in case of a market shock. Most investors return to gold as a viable hedge investment as it remains relatively stable (in comparison to other investment options) despite currency fluctuations. Also known as inflation hedging, in this scenario, investors spend on assets that provide the best returns with the least percentage of loss incurred against currency depreciation.

Gold is an excellent asset for hedging since it adds continued value to an investment portfolio. Moreover, its relationship with the US dollar is different from other assets. If the US dollar rate fluctuates, the value of gold will inversely rise since it doesn’t face the same depreciation as other resources. Putting it simply, a solid gold bar will serve as a block of money frozen in time that will maintain its intrinsic value irrespective of an economic downfall. This is one of the reasons that gold is the go-to investment for families and individual investors when the economy takes a hit.

Benefits of gold hedging

In an unstable economy, various industries have to cut their losses due to discrepancies in demand and supply. Consumers must rethink their buying power and resituate it towards less risky investments to help them survive a downturn. Major market players and banks still prioritize gold as a hedge investment because they acquire a greater return on every ounce of gold as the dollar falls. The gold reserve retains its worth as a result. The same kind of security cannot be ensured for assets like land, livestock, or trading goods which are directly associated with the buying power of the general public.

It is only feasible to secure your financial goodwill with an investment that can provide long-term viability. The COVID-19 pandemic posed unforeseen challenges to the stoutest of institutions, including popular stocks, brands, and trades. For shrewd investors, it also revealed the wisdom of securing assets that can withstand a blow to a global economy.

Your best bet as an investor is to allocate a considerable sum of your funds toward buying gold. While it may not give you absolute security in uncertain economic challenges, hedging in gold can ensure that a factor of your wealth and savings will remain available when most assets aren’t yielding the profit you hoped.

To find out how we can assist you in gold hedging and trading options, get in touch with our bullion department at info@hmbgold.com