Does It Make Sense To Buy Gold During Crises And Inflation?

Gold is a common answer when we are trying to protect our wealth against inflation and even times of great geopolitical uncertainty. For starters, gold has always acted as a store of value throughout history. In fact, it was one of the earliest forms of currency.

While it’s not feasible to lug around gold to pay for things today (because it’s really heavy and no one actually accepts it anymore), it’s still very relevant in our lives today. In a recent article we wrote, we found that gold prices have been extremely resilient, especially when financial markets have been in freefall headwinds.

For many of us, the investment landscape today looks treacherous. There are rising geopolitical tensions, inflation has been spiking in Singapore and globally due to COVID-19 disruptions, russia’s invasion of Ukraine and years of quantitative easing, interest rates are also on the up. At the same time, many investors have also seen a huge decline in their portfolios on at least 2 occasions since early 2020 – because of COVID-19 and the tech-led decline more recently. Gold has held its value relatively stably – rising about 1.5% in the year-to-date. On the other hand, the S&P 500 has declined more than 16%, while Singapore’s STI has dropped over 8% in the year-to-date.

Beyond gold, there are also other types of investments that we can look at that hedges against inflation, and we’ve written about 1) Gold; 2) property; 3) Business; and 4) Globally-Diversified Stock Indexes.

As this topic is near and dear, we also talked about it in our podcast. In it, we discuss how gold has held up in the recent financial crises (whether it was led by financial markets or conflicts). Speaking about investments today, we cannot ignore the effects of inflation on our portfolio. In general, one argument is that a piece of gold would be able to buy a similar basket of products today compared to in the future. That’s what we are ideally looking for when trying to hedge against inflation. We also moved on to talk about an interesting concept that one of us were recently discussing with our friends: what if we’re able to enjoy something (like wearing gold or even a watch or handbag), while still being able to see its price go up, even if it’s not an astute investment.

Listen to the full podcast episode here: Gold: Does It Make Sense To Buy It During Crises And Inflation?

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