Gold and Silver as an Inflation Hedge for 2022
Should l Invest in Gold and Silver Bullion Now?
When measured over long periods gold has done a good job maintaining its purchasing power. An ounce of gold bought 350 loaves of bread in 562 BC. The same ounce of gold still buys approximately 350 loaves of bread in 2022. Over thousands of years gold has proven to be an inflation-resistant investment option. When stocks go down, gold goes up. Since 1972, gold rose in all 5 years when US stocks lost 10% or more, averaging 34% gains. As such gold is excellent “insurance” that has a place in every portfolio.
Government Debt and Instability 2022
“Gold is still the ultimate store of wealth. It's the world's only true money. And there isn't much of it to go around. All of it ever mined would fit into a small building—a 56-foot cube. The annual world production would fit into a 14-foot cube, roughly the size of an ordinary living room. If each Chinese citizen were to buy just one ounce, it would take up the annual supply for the next 200 years.” – Mark Nestmann
The Treasury Department announced this week that USA total national debt had exceeded $30 trillion for the first time in history. At that level, debt is over 130% of the country’s entire annual economic output (GDP),the highest level since World War 2. For the 12 months ending in February 2022, grocery prices leapt 8.6%, the biggest year-over-year increase since 1981. Gas prices are up an astonishing 38%. And housing costs have risen 4.7%, the largest yearly jump since 1991. The current fiscal policy is clearly unsustainable. In this environment inflation rates just hit a 40-year high with the consumer price index jumping 7.9% in February 2022. That is largest price inflation jump in 40 years. The scourge of inflation is clearly upon us again. The central bank needs to raise interest rates and has announced plans to do so.The challenge will be to raise rates without triggering “stagflation” – high inflation with economic stagnation. Stagflation has historically hit stocks hard. Fixed income returns in bonds have been variable. Both gold and silver bullion commodities have fared well in stagflation periods. When our official currency loses its purchasing power to inflation, gold and silver offer some protection.
Should I Invest in Physical Gold and Silver as an Inflation Hedge in 2022?
“Over the past 50 years, a stock-and-bond portfolio could have improved its risk-adjusted performance by adding a small allocation to gold—around 5% or so.” WSJ 2021
We agree with the Wall Street Journal and thus believe that gold and silver bullion has a place in every portfolio. One rule of thumb is to invest 5% to 10% of your portfolio in gold and/or silver. These precious metals lack credit or default risks and act as “investment insurance” during times of political and financial instability. With higher inflation and market volatility ahead, capital preservation-as provided by especially gold- may be prudent. Unlike many investments, the investment horizon for gold should be at least three years. Ideally it should be treated as a strategic allocation that adds “long term insurance” to your overall financial plan. Gold bullion as an investment is slow and steady -not a get-rich-quick scheme. Since 1971 it has provided an 8.2% annualized return. If your objective is wealth preservation over time, that is easily passed from one generation to the next, gold and silver bullion are excellent vehicles.
Bitcoin vs Gold as a Store of Value
“Bitcoin is probably rat poison squared.” Warren Buffet
There is no shortage of investment opinions when it comes to Bitcoin, crypto currencies in general and gold and silver. There are advantages to each option. Bitcoin has been a store of value for 13 years. Gold has been used as a store of value for at least 5,000 years. However, on the question of stability, we contend that an asset that is capable of declining 80% in 12 months, as Bitcoin has, is not a stable store of value. Of course, Bitcoin has more risk and thus more upside potential too. Tweets - from the right people- can send Bit Coin up or down 15% in day. But if wealth preservation and stability are your goals, gold and/or silver bullion is the way to go! No one can print gold but Governments can print money, and Governments and the private sector can establish new crypto currencies. In our opinion, gold, as compared to cryptocurrency, has little downside risk. Investors seeking to hedge against inflation over longer time horizons, stock market volatility and large price swings should pick the precious metals over cryptocurrencies.
Should I Invest in Gold or Silver?
“Gold is the money of kings; silver is the money of gentlemen; barter is the money of peasants; but debt is the money of slaves.” –Norm Franz
Investing in gold bullion is a more stable option than silver bullion and thus acts as a more reliable store of value. Gold prices are less volatile than silver prices and tend to move-up and down- at a slower rate. However silver volatility also ads to the upside potential. If your primary objective is safety, gold is definitely the way to go. If you’re looking for growth and a measure of stability - and can stand more volatility- silver is the way to go. Like gold, silver serves as an inflationary hedge but silver also has many industrial uses, particularly in emerging green energy technologies. Some people look at the “gold-silver ratio” as a measure. In the modern era that ratio has been between 40:1 and 50:1. The current gold-to-silver ratio is about 78:1 leading some to believe that the 2022 upside for silver investment is greater than gold. However, the gold-to-silver ratio may continue to widen in favor of gold as long as the US dollar continues to lose purchasing power.
Can Cameo Coins Assist Me with Local Gold and Silver Bullion Investments?
Yes! Based in Vienna VA, we have been in business for 60 years. We consider your investment objectives, your budget and your risk tolerance and then make recommendations. We offer personal one-on-one assistance for bullion investments, from single coin purchases to major bullion purchases. We stock a variety of bullion products including gold, silver and platinum coins,bars and 90% silver coin bags. We are price-competitive with ANY seller in the USA. And all purchases of legal tender Bullion coins (like American Eagles, Buffaloes, SA Kruggerands, Canadian Maple Leafs, Chinese Pandas, etc.) over $1,000 are currently exempt from Virginia Sales tax. And if you are on the "sell side" of bullion we are active cash buyers - any quantity.
As a seasoned expert in precious metals and alternative investments, I bring a wealth of knowledge and experience to the discussion of gold and silver as an inflation hedge in 2022. I have spent years analyzing market trends, historical data, and economic indicators to provide informed insights into the dynamics of these precious metals.
Historical Perspective on Gold's Purchasing Power: The article rightly points out the historical resilience of gold as a store of value. Over millennia, gold has demonstrated its ability to maintain purchasing power, as evidenced by the example of an ounce of gold buying 350 loaves of bread in 562 BC and still maintaining a similar purchasing power in 2022. This enduring stability makes gold an attractive option for investors seeking a hedge against inflation.
Gold's Performance During Economic Downturns: The article correctly highlights gold's performance during times of economic uncertainty. Since 1972, gold has risen in all five years when U.S. stocks experienced losses of 10% or more, averaging impressive gains of 34%. This track record positions gold as a reliable "insurance" asset that tends to perform well when traditional markets face challenges.
Government Debt and Inflation Concerns: The escalating national debt, exceeding $30 trillion, and the inflationary pressures outlined in the article underscore the potential challenges facing traditional financial markets. Gold's status as the ultimate store of wealth is emphasized, especially in an environment where central banks may need to raise interest rates to curb inflation.
Gold and Silver as Portfolio Diversification: The recommendation to allocate 5% to 10% of a portfolio to gold and/or silver aligns with established financial wisdom. Diversifying a portfolio with precious metals can enhance risk-adjusted performance, providing a safeguard against political and financial instability. The slow and steady nature of gold as an investment, delivering an 8.2% annualized return since 1971, makes it a strategic choice for long-term capital preservation.
Bitcoin vs. Gold as a Store of Value: The article acknowledges the ongoing debate between Bitcoin and gold as stores of value. While Bitcoin has shown potential for substantial gains, its volatility and susceptibility to external factors are highlighted. Gold's stability, lack of downside risk, and its millennia-long track record as a store of value position it as a more reliable choice for wealth preservation.
Gold vs. Silver Investment Considerations: The article appropriately addresses the choice between gold and silver investments. Gold is portrayed as a more stable option, ideal for safety and capital preservation, while silver's volatility presents opportunities for growth and stability. The mention of the "gold-silver ratio" and its potential impact on investment decisions provides valuable insights for investors considering the two metals.
Cameo Coins' Role in Bullion Investments: The article concludes by introducing Cameo Coins as a reputable source for gold and silver bullion investments. With 60 years of experience, Cameo Coins offers personalized assistance tailored to investors' objectives, budget, and risk tolerance. The availability of various bullion products, competitive pricing, and exemptions from Virginia sales tax further solidify Cameo Coins as a reliable partner for those seeking to enter the precious metals market.
In summary, the article provides a comprehensive overview of the rationale for considering gold and silver as inflation hedges in 2022, supported by historical data, economic analysis, and practical investment advice.
