When dealing with inflation, it is fundamental to understand money is not the only store of value and if an inflationary period is to be expected, investment is best made in assets which have a track record of outperforming the market during similar periods.
As such, when inflation hits, investors seem to gravitate towards three particular assets: Gold, Silver, and, of course, Bitcoin,
Knowing the signals of an impending inflation period is half the battle, while the other half is creating a sound, inflation proof portfolio.
As such, lets look at 3 simple solutions which may be of great help.
Gold
We can all agree that gold has been a trusted store of value for over two millennia now.
Often regarded as a safe-haven asset, gold prices rise during periods of high inflation or financial uncertainty which, to no surprise, makes it the preferred investment in these times of trouble.
Moreover, gold, much like silver, has intrinsic value as a commodity, meaning that there is demand for it outside its basic functions of money.
In fact, Gold has outperformed inflation in the last 40 years and, as you would expect, it has recently hit a 5-month high as inflation surges on.
Gold has long been seen as a safeguard of purchasing power in the long run against more than just the price of goods and services.
When looking at the overall money supply, gold can also help investors protect against potentially excessive asset price inflation and currency debasement.
Silver
Silvers future is exciting and its past and present has been described as a bumpy ride.
Most portfolios would typically only a allocate small amount of silver, as a play designed to stem potential losses while the market is facing periods of downward pressure, meaning that when a downturn finally took place, your losses might be comparatively less than the stock markets.
As such, many investors would think that increasing his or her silver allocations past a certain amount had some serious opportunity costs.
However, with silver having more room to grow based on its long-term historic average price ratios, things might take an interesting turn.
We might in fact be close to a turning point because the Gold-Silver ratio is starting to narrow due to silvers relative outperformance versus gold, so the question remains: how will that pan out in the near future？
Bitcoin
Sure, while money can be printed out of thin air and Bitcoin has limited supply.
Bitcoin is limited to 21 million and that makes it perfectly scarce. That cannot change and it is a stark contest to how the USD works.
However, limited supply is only as valuable as the demand behind it.
The good news is that Bitcoins demand seems relentless with it going from $15000 USD to $65000 USD in a year and, in the process, outperforming any possible inflationary periods out there.
The fact is that while we tend to focus on US CPI when thinking about inflation, but Bitcoin provides a store of value to investors in many other countries out there, meaning that the demand for it tends to speed up when facing inflation.
With Bitcoins track record, and as inflation eats away your buying power, we definitely want a piece of that action.
Wrapping up
The bottom line is that wise investors will try to hedge inflation over time and not every time.
As such, any of these three picks seems like a reasonable choice when thinking inflation and long-term strategy.
Any investment is inherently betting on something and investing in either Gold, Silver, or Bitcoin is, in its essence, going long on fear.
And as inflation is now far from being “transitory” these might actually be the best bet.
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