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British Investors Turn to Gold as Inflation Surges

30.03.22

British investors nervous that inflation rates have hit the highest level in 30 years are starting to buy gold bars to protect their finances.

Inflation rates had fallen significantly throughout 2020 as Covid-19 took its toll. Demand for many goods and services collapsed in an unprecedented and unexpected fashion. Now the economy has up opened again and an exceedingly high degree of pent-up demand started chasing those same goods and services. The inflation pressures were further exacerbated by the surge in energy prices due to the war in Ukraine. However, this is not necessarily the real cause of the inflation upswing, and neither is it the cause of investor worries.

Central banks around the world have been running their proverbial printing presses since the financial crash of 2008, to recover economic growth and confidence and most significantly, to avoid a wide-spread collapse in the banking system.

In the modern world there are no “printing presses”. These days the monetary supply is increased digitally, and over the past number of years that has been happening at a greater rate than at any time in history. The Covid-19 pandemic added more fuel to the fire as governments and Central Banks tried to avert a full-scale economic collapse. Now the increase in geo-political tension might thwart their attempts to unwind this stimulus by raising interest rates. They are caught between a rock and a hard place.

When too much money chases too few goods and services, that is when we get inflation. Inflation erodes the value of money sitting on deposit, quickly! Therefore, investors have been moving their money out of deposits at an ever-increasing rate to protect it from the ravages of inflation. This resulted in many global stock markets reaching new all-time highs as investors sought a rate of return that surpassed the rate of inflation. However, ever more stock market all-time-highs breeds anxiety in investors wary of a deep correction, especially given that corporate earnings do not justify these lofty valuations. Fear of a full-scale bubble bursting looms large. And we have started to see some of these anxieties play out as tech heavy indexes like the Nasdaq falling heavily since it’s 2021 all-time high.

In times like these investors turn to gold. A tried, true, and tested hedge against inflation and economic uncertainty. And they are doing this now at an ever-increasing rate, as concerns about continued money printing and now surging energy prices, fuelling further rises in inflation, weighs heavily on them.

“We are seeing a significant increase in the number of new investors in the gold market that are becoming ever more aware and ever more concerned about protecting their financial nest egg. People are really starting to notice the effects of inflation as prices at the checkout and particularly in their energy bills, start to rise.

They are looking at the rising cost of living and then at their investment portfolio and realising that the traditional assets in their portfolio, will not protect them in a high inflation environment.

This is where, over the long-term gold plays a role. Over the last 20 years, inflation in the UK has risen by 2.5% per year (NSO). Over the same period, gold has risen by over 10% per annum. As an inflation hedge, gold has the historical credentials that other investments do not. That is why more and more investors are now learning how to invest in gold” GoldCore CEO Stephen Flood. 

https://www.goldcore.co.uk

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