Gold is often considered a safe haven and a good hedge against inflation. This is because, unlike paper currency, gold cannot be printed or created out of thin air. As a result, the value of gold remains relatively stable in times of inflation.
Inflation occurs when there is too much money in circulation and the value of money decreases. This can lead to rising prices and a decrease in people's purchasing power. When gold is used as a hedge against inflation, it can help preserve the value of an investment portfolio.
There are several ways to invest in gold, such as physical gold, gold ETFs or gold stocks. Physical gold, such as coins or bars, can be stored in a vault or safe deposit, for example. Gold ETFs are a way to invest in gold without having to buy physical gold. Gold stocks are shares in gold mines that track the value of gold.
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Aurus - tGold is digital gold
Learn more about Aurus and how it is going to revolutionize gold investing through blockchain technology. Now anyone can easily diversify their portfolio and take advantage of gold as the ultimate store of value and safe haven. Especially at the time of a bull market heading towards its peak or during a bear market, it can be very interesting.
Aurus is a new platform that merges the world of digital currencies with traditional precious metals investing. Tokenization makes it possible to invest in the safety and security of gold without the traditional drawbacks of limited transportability or high storage costs.
Aurus allows investors to buy, sell and trade gold in a secure and user-friendly platform. TokenizedGold or tGold (previously named AurusGold) is a highly portable, transferable and liquid digital asset that offers investors of all sizes a convenient and cost-effective digital alternative to physical gold bars. If you are looking for a safe and reliable way to invest in gold, Aurus tGold is the perfect option!
Gold (tGold) as a long-term hedge against inflation
Most investment experts say that gold should be part of a sound investment portfolio. One argument they use to support this view is that gold is a hedge against runaway inflation. Inflation is the investor's archenemy because the progressive rise in the prices of goods and services eats away at their profits over time.
The IMF defines inflation as a broad measure that leads to an increase in the cost of living or items in a country. The rising cost of everyday goods and services such as the haircut or soda indicates increasing inflation. According to the international financial institution, inflation indicates how much more expensive the relevant set of goods and services has become over a given period of time, usually a year.
For this reason, gold rallied when inflation rose to alarming levels in early 2022, pushing the gold price per ounce to $2,000 in early March. Job inflation reared its head after escalating tensions from the war between Russia and Ukraine. As a result, the high cost of items escalated when the U.S. Fed ruled out a 50 basis point interest rate hike.
Consequently, annual inflation in the U.S. rose to 8.6% during that period, the highest level of inflation since December 1981. Elsewhere in Germany, annual inflation rose to its highest level in 40 years as prices of oil and gas products soared to new highs.
The German consumer price index (CPI) rose to 7.3% from 5.1% in February as companies passed on these high energy costs to consumers.
"Welcome back to the 1970s! At least as far as food, commodity and energy prices are concerned," warned German bankers who asked the European Central Bank for tighter monetary tightening. "The longer this period of sustained shocks lasts, the more likely it becomes that economies will experience something like the 1970s," warned Maurice Obstfeld, former IMF chief economist.
In response to these fears, the European Central Bank has accelerated the unwinding of its monetary stimulus measures, a sign that the runaway inflation figures are indeed scaring it. On the other hand, the U.S. Fed implemented a massive rate hike in June in its fight against inflation.
The three-quarter percentage point rate hike is the largest the Fed has implemented in 28 years, following a half-point increase in May and a quarter-point increase in March. These actions reduced fears of runaway inflation and increased the opportunity cost of holding non-yielding gold.
Consequently, prices of the shiny yellow metal are back in the relatively neutral area of $1,800 per ounce and could fall further as central banks become more influential in soft landing their economies.
Their actions can further dampen short-term inflation and raise yields and interest rates, increasing pressure on precious metal prices. But while these actions may neutralize the short-term symptoms of inflation, they in no way mitigate the effects of money supply expansion, the actual cause of price inflation.
Central banks are printing money faster than economies can produce goods and services, increasing price inflation. To illustrate, between 1981 and August 2008, the money supply in the U.S. grew by $831 billion.
Then, after the Lehman Brothers bankruptcy filing, the Fed released $1.6 trillion into the economy in three months through its "quantitative easing" (QE). The expansionary monetary policy pushed the US M2 money supply by 27% in 2020 and 2021. It is the highest and fastest increase in dollars in circulation in America's history.
The incredible expansion of the money supply is leaking into the global economy, creating asset bubbles in the real estate market and raising the prices of goods and services. But unfortunately, incomes are not rising along with these events.
Therefore, an ounce of gold that was worth $35 in the 1940s and kept in a vault is worth much more in 2022. If you open that vault today, your ounce of gold will be worth $1800, while your $35 bills will only allow you to buy negligible amounts of goods or services.
Other benefits of investing in gold
Gold retains its value better than fiat in the long run. The value of this precious metal is not subject to the quantitative policy of central bank easing. You now need more fiat to buy an ounce of gold because the value of printed money decreases over time.
Consequently, gold is a long-term safe haven. However, it can generate negative returns for investors who enter the market during inflationary periods when there is positive sentiment. Over long periods, however, it will generate above-average returns.
To illustrate, gold had a 35% return between 1973 and 1979. However, buyers who entered the market between 1988 and 1991 had a negative return of 7.6%. Nevertheless, long-term holders have seen their gold prices rise from a low of $440 per ounce in 2000 to the current average of $1,800.
In addition to the strategic benefits of inflation hedging, there are many other benefits of gold in your investment portfolio. First, gold is the only private form of investment today. Unlike real estate or stocks that require ownership registration, you do not need to register ownership of gold. Consequently, you can buy bullion as a private repository of wealth and transfer it tax-free to your loved one under the 7-year inheritance scheme.
In addition, some investment income from physical gold is tax-free. Moreover, gold is one of the best-yielding assets of the 21st century. To illustrate this point, investment returns on gold in the United Kingdom have increased by more than 10% per year since the 2000s, while returns on the FSE 100 have increased by 4.1%.
Moreover, your savings rest outside the banking system when you invest in gold. As a result, your savings are not exposed to counterparty risk. Gold is also an excellent investment asset because it is a universally recognized store of value and medium of exchange.
So you can liquidate it worldwide as payment for goods or services. Finally, gold is rare and has a finite supply. Therefore, it will become more valuable over time.
Advantages of gold-based crypto such as tGold vs. physical gold
On the other hand, gold is an expensive commodity. Because of its expensive and rare status, it will be difficult to buy large amounts of gold at one time. When you buy gold, you will have to deal with storage, security and insurance costs, increasing the complexity of investing in gold.
If you choose to store your gold bars, coins or jewelry at home, you must purchase a vault and pay for transportation to and from your vault. The transportation of gold depends on the weight of your assets and the travel distance.
And although gold is universally acceptable, it has low liquidity. Therefore, you need to scour the market looking for genuine gold buyers, arrange transportation and make a good deal with them before selling gold.
The process of buying gold is also complex. First, you need to make sure you are buying genuine bullion and not dyed lead. Fraudulent sellers often sell gold of incorrect purity at higher than normal prices. If you then buy gold for short-term gains, you may lose profits due to volatility.
Gold, like cryptocurrency, is a speculative commodity that derives its value from its rare quality and limited supply. Moreover, this yellow precious metal does not yield a return and, in some cases, can be taxed. Therefore, smart gold investors buy gold-backed crypto coins such as tGold instead of physical gold.
The Benefits of Gold-Backed Crypto: tGold
Commodity-backed stablecoins like tGold are growing in popularity in crypto circles because they are less volatile than mainstream cryptocurrencies and are therefore a stable store of value. You can redeem your gold-backed crypto coins for an amount of gold comparable to the 1:1 redemption status of USD- or euro-linked stablecoins such as PAR or USDC. In the case of tGold, one token represents one gram of gold.
When you buy tGold, you hold a token with the same value as gold in your digital portfolio. Its price tracks the actual price of gold, and you own physical gold without the added complexity and cost of holding it physically.
Gold-backed cryptocurrencies are more liquid and have more utility. As a result, they are a less complex route to commodity trading.
AurusX is the rewards component of the Aurus ecosystem, a decentralized fee-based protocol that generates progressive rewards based on transactional activity within the Aurus ecosystem. Rewards can be claimed in gold, silver and platinum via the Aurus Mobile App. A new way to passively grow your precious metal holdings.
AurusX is also a governance token, which gives you the right to vote on proposals and influence the governance of the entire Aurus ecosystem.
The Aurus Ecosystem includes a unique collaboration model that can benefit traditional players in the bullion industry. Bullion refiners and dealers looking to venture into the digital asset space can use the Aurus blockchain protocol to mint their gold, silver and platinum tokens to offer a new digital product and earn rewards. Some partners of the Aurus ecosystem for minting precious metals include Aurica Metales, Aga Bullion, StoneX and Direct Bullion. There is no better time to invest in gold as experts sound the alarm about an inflation "time bomb" that could be devastating for savers.
Join the tokenized precious metals investment movement today and lower the opportunity cost of your gold investment through Aurus gold-backed crypto tokens. Or partner with Aurus and support the development and success of a self-sustaining crypto ecosystem that scales as more people invest, trade and store Aurus' bullion-backed tokens.
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