In a world of inflationary pressure, where do investors turn?
- By FXT
- January 10, 2023
- FXT Analysis
Investors are faced with pressures unseen for many years, where inflation is on the rise. So where does that leave them in terms of where to put their money and how to protect and grow their wealth?
Read on as we take a deep dive into safe havens against inflation and economic unrest, along with a detailed look at those assets.
What are safe haven currencies?
Safe haven currencies are currencies that are expected to hold their value or potentially increase in value during times of economic uncertainty or market instability. Some examples of currencies that are often considered to be safe havens include:
U.S. dollar: The U.S. dollar is the world’s reserve currency and is widely accepted and recognized globally. It is considered to be a safe haven currency in part because the U.S. has a large and stable economy, and the U.S. government is able to borrow at low interest rates.
Swiss franc: The Swiss franc is considered to be a safe haven currency because Switzerland has a stable political environment, a strong economy, and a long history of political neutrality.
Japanese yen: The Japanese yen is considered to be a safe haven currency because Japan has a large and stable economy, and the Japanese government is a major creditor nation with a low level of debt.
Gold: Gold is not a currency, but it is often seen as a safe haven asset because it is a physical asset that has a long history of being used as a store of value and a medium of exchange. It is widely recognized and accepted as a symbol of wealth and stability, and some people believe that it can act as a hedge against inflation and economic uncertainty.
What are some other typical safe haven assets?
Safe haven assets are investments that are expected to hold their value or potentially increase in value during times of economic uncertainty or market instability. Some examples of assets that are often considered to be safe havens include:
U.S. Treasuries: U.S. Treasuries are debt securities issued by the U.S. government. They are considered to be very safe investments because they are backed by the full faith and credit of the U.S. government.
High-quality corporate bonds: High-quality corporate bonds are debt securities issued by well-established, financially sound companies. They may be considered to be safe haven assets because they offer a fixed return and are issued by companies that are less likely to default on their debt.
Real estate: Some people view real estate as a safe haven asset because it is a physical asset that can potentially increase in value over time. Additionally, real estate is not as liquid as other financial assets, which can make it less vulnerable to market fluctuations.
Cash: Cash is a safe haven asset in the sense that it is a liquid and stable asset that can be easily converted into other currencies or assets. However, it is important to note that the value of cash can be eroded by inflation over time, so it may not necessarily provide a long-term store of value.
When was gold first used to symbolize or reflect currency?
The use of gold as a symbol of wealth and as a medium of exchange dates back to ancient times. Gold has been prized for its beauty, rarity, and durability, and has been used as a form of currency in various cultures around the world.
One of the earliest known uses of gold as currency was in ancient Egypt, where gold was used as a medium of exchange and a store of value. Gold was also used as currency in ancient Greece, Rome, and other civilizations.
In more recent history, gold has been used as a backing for paper currency in various countries. The gold standard, which was in place in various forms from the late 19th century to the early 20th century, was a monetary system in which the value of a country’s currency was tied to a specific amount of gold. Under the gold standard, governments were required to hold a certain amount of gold in reserve in order to back the currency that was in circulation.
Today, gold is no longer used as a backing for paper currency in most countries, but it is still widely recognized and accepted as a symbol of wealth and stability, and is often seen as a hedge against inflation and economic uncertainty.
What is the chemical makeup and atomic structure of gold and what makes it important?
Gold is a chemical element with the symbol Au and atomic number 79. It is a soft, yellow metal that is highly prized for its beauty, rarity, and various industrial and decorative uses. Gold is a good conductor of electricity and is not corroded or tarnished by air or moisture, which makes it ideal for use in electrical connectors and other applications.
Gold is considered to be an inert metal, which means that it is not chemically reactive under normal conditions. This property makes gold resistant to corrosion and tarnish, and enables it to maintain its shine and luster over time. Gold is not prone to reacting with other elements or compounds, which makes it useful in a variety of applications where its chemical stability is desired.
Gold’s chemical stability is due in part to its atomic structure. Gold atoms have 79 protons in their nucleus, surrounded by a cloud of 79 electrons. The outermost shell of an gold atom contains 32 electrons, which gives it a full electron configuration and makes it relatively stable and unreactive. Gold’s outermost electrons are also not very reactive, which further contributes to its chemical stability.
Despite its chemical stability, gold can still react with certain chemicals under certain conditions. For example, gold can react with strong acids to form gold ions, and it can also react with certain other elements or compounds under high temperatures or pressures. However, these reactions are not common under normal conditions, and gold is generally considered to be an inert metal.
The chemical symbol for gold, Au, comes from the Latin word for gold, “aurum.” Gold is a member of the metal group of elements, which includes silver and copper. It is a dense, heavy metal that is relatively soft and malleable.
The atomic structure of gold is characterized by the presence of 79 protons in the nucleus of each gold atom, surrounded by a cloud of 79 electrons. The electrons are arranged in shells around the nucleus, with the innermost shell containing 2 electrons and the outer shells containing 8, 18, and 32 electrons, respectively.
Gold is important for a variety of reasons. It has a long history of being used as a store of value and a medium of exchange, and is widely recognized and accepted as a symbol of wealth and stability. It is also used in a variety of industrial and decorative applications, such as in jewelry, coins, and electronic devices. Gold is a good conductor of electricity, which makes it useful in electrical connectors and other applications. It is also resistant to corrosion and tarnish, which makes it useful in a variety of other applications where these properties are desired.
Why is gold said to be a hedge against inflation?
Gold is often seen as a hedge against inflation because it is a physical asset that is not subject to the same kind of price fluctuations as stocks and other financial assets. The value of gold is not directly tied to the performance of any particular economy or government, so it may be less vulnerable to the kinds of forces that can cause prices to rise or fall. Additionally, gold has a long history of being used as a store of value and a medium of exchange, and it is widely recognized and accepted as a symbol of wealth and stability.
Inflation can erode the value of traditional fiat currencies, such as the US dollar, over time, because it reduces the purchasing power of those currencies. If the general level of prices for goods and services is increasing faster than the supply of money, then the value of that money will decline. This is why some people view gold as a hedge against inflation: because it is a physical asset that is not subject to the same economic forces that can cause the value of money to decline.
However, it’s important to note that the value of gold can also be affected by a variety of factors, such as market demand, political instability, and economic conditions. Additionally, the use of gold as a store of value is not without risks, and there is no guarantee that it will necessarily protect against inflation or provide a stable store of value.
Is Crypto Like Gold?
Cryptocurrency is a type of digital or virtual currency that uses cryptography for security and is not backed by any central authority, such as a government or a central bank. Some people view cryptocurrency as an investment, similar to gold, because it can potentially increase in value over time. However, there are also some significant differences between cryptocurrency and gold, such as the fact that gold has a long history of being used as a store of value, while the use of cryptocurrency as a store of value is relatively new and still being developed. Additionally, gold is a physical asset that can be held and stored, while cryptocurrency exists only in digital form and is stored in a digital wallet.
What are the cryptocurrencies that are said to match gold?
Some people believe that certain cryptocurrencies, such as Bitcoin and Ethereum, have characteristics that make them similar to gold in some ways. For example, both Bitcoin and gold are limited in supply, which means that there is a finite amount of them that will ever exist. This characteristic can make them attractive to some investors who see them as a way to potentially store value and protect against inflation. Additionally, both Bitcoin and gold are considered by some to be safe haven assets, meaning that they may hold their value or even increase in value during times of economic uncertainty or market instability. It’s important to note, however, that the value of any cryptocurrency, including Bitcoin and Ethereum, can be volatile and may be influenced by a variety of factors, such as market demand, regulatory developments, and technological innovations.
What is the Correlation between Crypto and Gold?
There is no direct correlation between cryptocurrency and gold, as they are two separate and distinct assets. However, some people believe that there is an indirect relationship between the two, in that the performance of gold can influence the demand for cryptocurrency and vice versa. For example, if the price of gold were to decline, some investors might decide to invest in cryptocurrency instead as a way to diversify their portfolio or hedge against economic uncertainty. On the other hand, if the price of cryptocurrency were to decline, some investors might decide to invest in gold instead as a more stable and established store of value. It’s important to note that these are just hypothetical scenarios and the relationship between cryptocurrency and gold is not necessarily predictable or consistent.
How can crypto protect against inflation?
Inflation is a measure of the rate at which the general level of prices for goods and services is rising, and consequently, purchasing power is falling. Central banks attempt to limit inflation, and also avoid deflation, in order to keep the economy running smoothly.
Some people believe that cryptocurrency has the potential to act as a hedge against inflation, because it is a decentralized asset that is not directly tied to any particular country or economy. Inflation can erode the value of traditional fiat currencies, such as the US dollar, over time, because it reduces the purchasing power of those currencies. Since cryptocurrency is not issued or backed by any central authority, it may be less susceptible to inflationary pressures.
However, it’s important to note that the value of cryptocurrency can also be volatile and may be influenced by a variety of factors, such as market demand, regulatory developments, and technological innovations. Additionally, the use of cryptocurrency as a store of value is still a relatively new concept, and it is not yet clear how it will perform in the long term.
How can trading be considered a form of safe haven investing?
Long term investing is sometimes not enough. Trading, or actively buying and selling financial assets such as stocks, bonds, or commodities, can be considered a form of safe haven investing in some cases. This is because trading can allow investors to quickly move in and out of positions in response to changing market conditions, which can potentially help them to protect their portfolio against losses during times of economic uncertainty or market instability.
Cash is often considered to be a safe haven asset because it is a liquid and stable asset that can be easily converted into other currencies or assets. Holding cash allows investors to be ready to take advantage of opportunities that may arise in the market, or to quickly sell assets that may be declining in value.
Being able to move in and out of the market quickly can be an important consideration for investors who are looking to protect their portfolio against potential losses. However, it’s important to note that trading carries its own risks and can be a volatile and unpredictable way to invest. Additionally, being able to move in and out of the market quickly also requires access to significant amounts of capital, which may not be available to all investors. As such, trading may not be suitable for all investors and should be considered carefully in the context of an overall investment strategy.
Start trading gold, crypto and safe haven currencies today, <REGISTER NOW>