If you have part of your portfolio invested in emerging market assets, then you should consider diversifying into gold in order to hedge against exchange-rate volatility and streamline the efficiency of your accounts, according to a recent World Gold Council report. Exchange-rate risk is becoming an increasingly serious and prevalent problem as more and more investors seek greater returns outside of their domestic markets.
Yes, it can be expensive to hedge your finances, but not doing so puts your portfolio at risk, as emerging market currencies can be prone to volatilities that you need to be prepared for.
“Gold’s unique characteristics as an asset and currency hedge are particularly relevant to investors with emerging markets exposure, where currencies and asset prices are more vulnerable to price swings and tall-risk events,” said Juan Carlos Artigas, Global Head of Investment Research at the World Gold Council.
And the report found that gold is a more affordable hedging option compared to traditional methods.
“Gold has a low investment cost relative to traditional foreign exchange hedges and is a proven hedge against tall-risk,” Artigas went on to say. “Given these qualities, there is a strong argument for complementing existing exchange-rate hedging strategies with gold.”
The best type of investment to use as hedge is physical gold. Investing in gold bullion bars or coins is the safest thing to do to protect your finances from any currency fluctuations, whether it be from an emerging market or your own country’s.
Why is Gold Such a Good Hedging Strategy?
Compared to currencies, or fiat money, gold is something of tangible value that investors tend to fall back on when currencies see trouble. Historically, gold has thrived during times of economic discord, as it has a negative correlation to the U.S. dollar and other developing currencies. Furthermore, the World Gold Council report states that gold has a positive correlation to emerging market growth, therefore making it the perfect investment to use as hedge for portfolios that include these types of assets.
But that negative correlation to the dollar means that gold is an effective fallback for investors with domestic asset-based portfolios, as well. As the dollar’s value goes down, the price of gold goes up. It’s that simple. And considering the Federal Reserve’s plans for the economy in 2013 and beyond, the dollar is likely to see more devaluation in its future.
Gold is no longer a fringe investment for those who see the apocalypse looming just over the horizon. It is a smart investment, the perfect hedge against the whimsy of the financial and currency markets.
Here at Certified Gold Exchange, we believe that you are the best authority on your personal portfolio and that you are ultimately the one who must decide on what you will or will not invest in. That is why Certified Gold Exchange carries no discretionary or managed accounts. Our job is to advise household investors on the smartest ways to invest in precious metals, such as modern gold bullion bars and coins, certified rare coins, and silver, as well. We provide counsel and facilitate gold and silver purchases. You retain complete control of your investments.
If you are ready to begin investing in gold, or would like a copy of our 2015 Gold Investment Guide, contact us today. Give us a call at 1-800-300-0715 or email us and one of our friendly and knowledgeable representatives will get back to you as soon as possible.
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