There are many reasons to invest in gold

If you haven’t thought about adding gold to your investment portfolio before, you may be missing out on one of the best hedging investments possible. What that means is that gold can protect your portfolio when things go bad. If the value of the dollar plummets or if inflation rears its ugly head, gold will most likely increase in value significantly. In fact, if a serious monetary or inflationary crisis were to occur, gold could truly explode in value. This is some serious protection for your portfolio, the kind of protection that allows you to sleep safely at night.

How exactly does hedging work? Let’s cover some basics first. For centuries, gold has served all kinds of civilizations as a store of value and wealth; money, basically. Countless currencies have used gold as a basis for their underlying value over the years. But these days, we have pretty much abandoned this “hard” money system. The major currencies of the world today, like the dollar, the euro, the pound, and the yen, are called fiat currencies. What this means is that the currencies themselves are not really worth anything; they’re only paper, in other words. Instead, the currency only has value simply because the government says it does. This is what we mean when we refer to the word “fiat.” Fiat currencies of the modern world no longer rely on gold for the basis of their value. They are just paper.

Why should you care about this? It’s important because, since the currencies of the modern world are no longer linked to gold, their values can be manipulated by governments and central banks. Specifically, the central banks of the world can inflate their money supplies, which basically means that they are simply creating more money out of thin air. Inflation simply means that the currency loses its value over time. This is why prices on most things, including food and housing, continue to go up virtually every year. In fact, since the US dollar was taken off the gold standard, the Federal Reserve has inflated the money supply to the point where a dollar today is worth 96% less than it was when the dollar was linked to gold. Obviously, this is a real loss in value, and this trend will only continue as inflation again increases.

This is the truly important part: in order to stop the tremendous losses caused by the financial crisis of 2007 and 2008, the Fed has adopted some drastic, unprecedented measures. These actions include a sharp increase in the money supply. This means that the dollars you hold could lose even more of their value if inflation picks up. And some experts believe that the actions of the Federal Reserve have made it so the dollar could potentially collapse in the near to intermediate future. This would put the US economy in serious jeopardy, as well as your investment portfolio, which, of course, is denominated in the same dollars that have just collapsed in value.

With this worst-case scenario in mind, let’s turn back to gold. Investing in gold can give your portfolio some real protection from a serious inflationary monetary crisis like the one we just examined. After all, this is the specific purpose of a hedging investment like gold. Even if a crisis happens and part of your portfolio drops significantly in value, the hedged part of the portfolio can make up for it by increasing in value. If inflation increases dramatically or the dollar does eventually collapse, gold will not only hold on to its value, but jump much higher in value. For this reason, you really should give some thought to adding gold to your portfolio.

As uncertainty in the global economy increases, now is the perfect time to consider all of the great reasons to put your money in gold. Gold has the ability to protect you from serious inflation and an economic crisis. You really should consider an investment in gold.