How Investing In Gold Can Help Protect You During Inflation

The economic climate in the United States has been cause for great concern amongst consumers in recent years. The price of groceries, gas, housing, and other basic necessities are more expensive than ever before, and the average American is going through a great deal of financial hardship as a result. According to data acquired by the Bureau of Labor Statistics, there has been a near 22% rise in cumulative inflation since 2020. This acceleration can largely be attributed to factors like supply chain disruptions, increased government spending, low interest rates, and labor market imbalances caused by the Covid-19 pandemic.

That being said, the egregious surge in inflation we've seen in recent years is more of an irregularity than the new normal. Instead, the New York Fed's survey of consumer expectations projects a 2.3% three-year rate of inflation ahead. Still, that will add up over time, forcing consumers to confront the sad reality that the purchasing power of their dollar simply doesn't get us as far as it used to. But knowing all of this information, what to do about it? Here's how investing in gold can help protect you during inflation.

The best way to protect your hard earned money during periods of inflation is to invest in an asset that has historically been proven to grow at a faster rate. Gold is a perfect example of one of these assets, but let's take a look at its track record in order to ascertain why. Between 1970 and 1980, interest rates went from 5.84% to 13.58%. However, gold, during those same 10 years, grew by a whopping 2,330% per share, starting the decade at $35 per ounce and ending at $850 per ounce. When you look at it like that, you don't even have to do the math to realize if you had invested in gold even at the halfway point of that decade, your investment would have still significantly outperformed inflation.

That said, gold has been historically proven to be a significant hedge against inflation. In just the past year alone, its price has risen nearly 40%, further backing this claim. It is worth noting that nobody can predict the future, and so you should not be expecting to make a 2,000% return on your investment in gold by 2035. Still, it's better to take your chances investing a percentage of your portfolio into the asset, as it will do you far better than letting that potential investment sit in a cash position. But knowing this, how exactly would one go about investing in gold in the first place? Let's find out.

The most obvious way that one could buy gold is to physically purchase the precious metal from a reputable gold dealer. However, this option may not be the most accessible or affordable for the average person. That said, the easiest and most up front way to invest in gold is to purchase shares of a Gold ETF. Some good examples of these are Goldman Sachs Physical Gold ETF (ticker AAAU), GraniteShares Gold Shares (ticker BAR), and iShares Gold Trust Micro (IAUM). These allow you as an investor to gain exposure to the asset without having to physically purchase it, and are also much more affordable.

Also, if you're looking for a way to invest in gold that could benefit you the most in retirement, it may be worth checking out a precious metals IRA wealthy people use to stay rich. This as well as other Gold IRA's can be a good way to diversify your retirement portfolio all while protecting a portion of your money from inflation. Outside of this, some other ways to gain access to gold as an investment could be to invest in companies that mine the precious metal, or gold savings accounts which are offered by some banks.

Choosing the best approach for you to begin investing in gold largely depends on your budget, risk tolerance, and knowledge of how you want to structure your investments. Although gold can be a great hedge for inflation, like any asset, it is also prone to any volatility that happens in financial markets. None of us truly know what the future holds, so make sure you keep that in mind when choosing to allocate money to the gold investment vehicle of your choice.

At the same time, while like any asset, potential risks do exist for the future of gold, there will also be catalysts that could lead to a greater surge in its price. Inflation can be one factor, and scarcity could be another. If you do make the decision to purchase gold in the future, make sure you've done all the proper research before pulling the trigger.