Friday 15 March 2013

Battle Inflation By Making Use Of Gold And Silver

By Allan Palen


Many individuals have heard that investors use precious metals in order to gain protection from inflation. How does this work though? Should you have considerable holdings in this sector? In order for you to decide on which holdings you should include in your portfolio you will need to examine a number of things. One of these is the risk if inflation in the near future. Many suspect that as soon as Ben Bernanke and the Federal Reserve stop the quantitative easing that they have been engaged in then hyperinflation will quickly become the new reality.

The economic theory of supply and demand applies when it comes to the supply of currency. As currency is easily being released into the market as it is now, the cost of goods and services would inevitably rise as there would be too much money being spent on limited goods and services. To preserve your wealth, vehicles like precious metals such as gold, silver, platinum and palladium should be leveraged on. This is because they act in an opposing manner to that of the US dollar.

It would be a bane to all Americans if hyperinflation were to happen. While the government of the day might argue that quantitative easing would boost consumerism and help the economy to grow, the flip side of the argument is that the increased supply of money would only drive the costs of every item and service in this country higher. No one could escape from the rippling effects of hyperinflation; the lower middle class would be affected the most whereas the wealthy would see the profit margins of their businesses shrink.

Bullion is one of the best ways to counter the effects of hyperinflation and bring you satisfactory returns in an economic climate like this. Precious metals have an inverse relationship with the US dollar, and this essentially means that as the US dollar loses its value further, the bullion that you have in possession would experience a surge in their value. You would be able to enjoy your current lifestyle better if you choose to leverage on these metals.

Through history gold has been the obvious choice when economic times are rocky or the future is very uncertain. Many expect the current administration in Washington to change the rules and penalize investors for being successful. The longer the Fed continues to suppress any inflationary increases with quantitative easing the higher these numbers could go once they are finally allowed to move naturally. That could mean hyperinflation, and a situation which could cause currency to become almost worthless.




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