Hedging your Earnings 101

hedge assets

Gold prices movements act like currency but it’s an investment asset like any other, that’s what the feds said to Ron Paul. They missed that gold was the currency before the federation was even a thought. If there is a tiny bit of possibility for what the feds said to be true, what are others “hedge assets” to protect my hard-work earnings?

Starting with most beloved, the infamous yellow metal, gold coins date back to further than 600 BC, where a gold coin was discovered minted in Asia Minor. This discovery may indicate how old this metal was the basic of the money concept. It is rare, but not too rare like diamonds or too common like iron for example, and it is a durable metal. Not to mention its luster that doesn’t go with time, and this gives it charm and beauty. Practically, it’s a dense metal, which make it excellent to store for long periods. Its prices are the most stable compared to others, as it is valued all over the world in every culture.

Another popular hedging asset that also dates back even before gold, land and in modern era what we call Real Estates, is very good asset. There are some drawbacks like you can’t move it, and it can easily be confiscated or lost in times of political turbulence. But, it is more valued as the supply of “land” is fixed.

The shadow of gold and its little brother, silver, also can be used for hedging. It’s more common and loses its luster faster. That’s why it has less value than gold. Still, it is the perfect alternative for gold as it shares the same cultural and historical value.

Diamonds, these rare rocks have the highest values. A handful of high quality diamonds can make your dream come true. Buy a new ride, a new house, and live happily ever after with no worries of earning your bread for the rest of your life. But they are so rare and have no universal price standard per gram. The price depends on the 4Cs; the cut, carat, color and clarity. So, its value is an estimated value, that depends on how good you can haggle and how the other party is good to.

A new rare metal was discovered, platinum. This new brother of the precious metals family is the rarest of them, yet it is not valued as his older brother, gold. Humanity thought it was high quality silver, before science was able to differentiate between them. This new brother lacks what his older brothers had, culture and history. Maybe in the next few decades it will be the next standard for trading, but now it’s not the time. Remember that I said “maybe”, because there is still the possibility that it may not.

What happened in the 70s and the 80s surely was crazy! Gold prices jumped to reach an all-time high of $2,508 and “Black Gold” prices rose from $2 to over $30. I’m talking about oil. That black fluid barrel now worth somewhere near $100! It is consumable and everyone needs it, or not? I mean, as a common guy, I can’t turn my savings into oil. Where can I store 1,000 barrel of oil? And how can I store it safely? So, physically buying oil is not a good investment. Maybe in the Forex or stock exchange markets it a very good investment. But I’m trying to hedge my hard-earned money against inflation because I don’t trust the papers or the banks, to some extent.

Are there any hedging asset? Have we left anyone over? Foreign currencies you say? Stocks and ETFs? I don’t trust my government’s paper money, should I trust another government’s papers? I need something physical I can see with my own eyes and touch with my own hands… these are tough times!

To sum up, physical gold is the best option for hedging your wealth. Central Banks use it, and major financial co-operations. Remember that you can’t eat gold, but you can exchange it almost anywhere or anytime to whatever the currency of where you at, if gold is not the currency they use.

Another thing to keep in mind, what works for me doesn’t mean it works with you. Find your own safe-haven. Some found ETFs, bonds and stocks as a great hedging asset, while others saw real estate was it.