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Money Talks | Should you use gold or silver to hedge against inflation?

We see adds all of the time on television advocating for investing in hard assets, but should you?

TEMPLE, Texas — Buy gold, use gold to hedge against inflation. So, should you invest in hard assets like gold and silver? Will this help offset inflation for you? And where should I keep these items? 

In the early 2000s, gold was worth 279 dollars per troy ounce. It peaked in 2021 at 1,798 dollars per troy ounce. A big spike. 

"Gold gets a lot of attention when it outperforms the stock market, but historically it's been a horrible long-term investment," said certified financial planner Neil Vannoy. "For example, gold is down around 40% from its inflation-adjusted high in 1980 while the S&P 500 has returned 8.8% per year since January 1980."

In 1933, America went off the gold standard. Then in 197,  President Richard Nixon closed the gold window in order to address the country's inflation problem and to discourage foreign governments from redeeming more and more dollars for gold. 

For the past 5 decades it would seem that has served Americans well. "If gold were a perfect inflation hedge then the past year would've been a great time to have all of your money in gold," said Vannoy. "Viewers probably remember hearing in November that prices were up 6.8% over a year earlier. Over that same time period gold spot prices were slightly negative, so gold investors lost money on both a real as well as an inflation-adjusted basis."

And remember, if you own a hard asset, that is only one entity, that makes diversification very difficult. Investment products sold today can keep you easily very diversified, lowering, but not eliminating, your risk. 

"Stocks have historically been a better inflation hedge than gold, and it's much easier for investors to own stocks than gold and silver, " said Vannoy. "Investors that use low-cost index funds can invest in the entire us stock market for around 0.03% per year and diversify into international and emerging market stocks for not much more than that."

And if you have hard assets, where will you store them? 

The weight for transfer can be enormous and to secure them safely, somewhere out of your house, like a safe deposit box, will cost you continual overhead. Not to mention, even in a safe at your home they could be stolen or damaged in a fire.

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