Bitcoin and Gold Are Put to the Test for Investors, Thanks to Inflation

You’ve been hearing it all over the news: Inflation is at a record high, putting gold and Bitcoin investments to the test. Saving for retirement means needing to account for inflation; however, many people have not accounted for such a record-high increase in inflation. How do you keep your retirement savings and your other investments safe at such a time? The best way is by hedging them with other investments, such as gold and Bitcoin. Keep reading for how Bitcoin and gold are being put to the test for investors, thanks to inflation.

What is Inflation?

According to Investopedia, inflation is the decline of purchasing power of a given currency over time. A quantitative estimate of the rate at which the decline in purchasing power occurs can be reflected in the increase of an average price level of a basket of selected goods and services in an economy over some period of time. The rise in the general level of prices often expressed as a percentage, means that a unit of currency effectively buys less than it did in prior periods. Inflation can be contrasted with deflation, which occurs when the purchasing power of money increases and prices decline.

Investing in Bitcoin and Gold to Hedge Against Inflation

A recent article by CNBC paired strategists and experts to define how Bitcoin and gold can protect investments during such unprecedented inflation times. The divergence calls into question whether investors are opting for bitcoin over gold as a hedge against rising inflation, but the strategist behind the world’s largest gold-backed exchange-traded fund begs to differ.

“I think it is quite possible for these two assets to coexist quite happily in the market because they do completely different jobs,” George Milling-Stanley, chief gold strategist at State Street’s SPDR ETFs, told CNBC’s “ETF Edge” on Monday.

The SPDR Gold Trust (GLD), the biggest ETF in the world backed by physical gold, will enter its 17th year in the public markets on Nov. 18. It is down almost 4.5% in 2021 and up around 281% since its 2004 launch.

“The historical promise of gold to investors has always been twofold: one, that over the long term — and I stress this, over the long term — gold can improve your returns and it can also help to reduce your volatility,” Milling-Stanley said.

While gold has a track record of improving risk-adjusted returns over longer time periods — “the holy grail of any asset allocator” — digital coins carry more risk, increasing volatility and making returns subject to their often-drastic short-term swings, the strategist said.

That’s why lasting inflation will likely draw gold back into favor, he said.

“Gold is a very good preserver of purchasing power during periods of sustained high inflation, by which I mean many months with inflation at over 5% a year. In those kinds of periods, which we last saw sustained in the 1970s, then gold gave annual capital appreciation equivalent to about 16% a year or a real return of around 11%,” he said.

“Right now, we’ve had inflation around 5% for maybe three or four months with everybody telling us it’s transitory, it’s going to pass, so I’m not at all surprised that gold hasn’t responded to these inflation numbers just yet.”

Bitcoin and other digital assets may be siphoning some capital away from gold, but it’s too early to say if it’s because they successfully hedge against inflation, GraniteShares founder and CEO Will Rhind said in the same interview.

Investing in Gold or Silver with Priority Gold

The annual inflation rate in the US accelerated to 7.9% in February of 2022, the highest since January of 1982. This means that all of the money you have saved for retirement, as well as any investments you have made, are all worth 7.9% less than you predicted. This means you may not retire as soon as you had hoped, or you may need to budget more tightly in order to achieve your financial goals. Or, you can turn to Bitcoin and gold.

One of the best ways to hedge against this inflation and protect your future is to invest in Bitcoin and gold. If you are ready to invest in gold to protect your savings and secure your future, we can help. Priority Gold is one of the most trusted precious metals dealers in the United States with BBB A+ Rating, AAA Rating with Business Consumer Alliance, and 5 Stars Rating with TrustLink. There are many options for investing in gold, and you do not need to be an expert to get started. You can invest in physical gold, open a Precious Metals IRA account, or rollover your current one.

We specialize in providing precious metals investment services with Security, Liability, and Great Convenience for customers. Our team is committed to helping to streamline their precious metals purchases at a fair price, selecting the right precious metals portfolios, and meeting their important financial objectives. We offer Free Storage for qualifying Gold & Silver IRA accounts, a fast & easy gold buying process, and smooth IRA Transfer.

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