Presentation on Inflation’s Hedge Against Investor’s

Presented By-:

NITISH KUMAR

HIMASNHI

VAIBHAV

MANIKA

SUNNY

SYNOPSIS

Definition Types of Inflation Effects of Inflation Inflation Hedging Investment Products

Gold & Precious Metal Real Estate Crude oil

INFLATION

Inflation is an increase in prices for goods and services of an economy over a certain period. A general increase in prices and fall in the purchasing value of money Example-:

You buy a candy bar for Rs 50. A month later, you go to buy the same candy bar and it's Rs 55 . You still have only Rs 55, but the price of the candy bar has gone up. We can say that inflation is at

work. The price of that bar has been inflated.

Types of Inflation’s

(a) DEMAND - PULL INFLATION:   In this type of inflation prices increase results  from an excess of demand over supply for the economy as a whole. Demand inflation occurs when supply cannot expand any more to meet demand; that is, when critical production factors are being fully utilized, also called Demand inflation.

 (b) COST - PUSH INFLATION:  In this type of inflation occurs when general price levels rise owing to rising input costs. In general, there are three factors that could contribute to Cost-Push inflation: rising wages, increases in corporate taxes, and imported inflation. [imported raw or partly-finished goods may become  expensive due to rise in international costs or as a result of  depreciation of local currency ]

EFFECTS OF INFLATION

They add inefficiencies in the market, and make it difficult for companies to budget or plan long-term.

Uncertainty about the future purchasing power of money discourages investment and saving.

There can also be negative impacts to trade from an increased instability in currency exchange prices caused by unpredictable inflation.

Higher income tax rates. Inflation rate in the economy is higher than rates in other

countries; this will increase imports and reduce exports, leading to a deficit in the balance of trade.

An investment that is considered to provide protection

against the decreased value of a currency. An inflation

hedge typically involves investing in an asset that is

expected to maintain or increase its value over a

specified period of time. Alternatively, the hedge could

involve taking a higher position in assets which may

decrease in value less rapidly than the value of the

currency.

Inflation Hedging

Following types of investment product-:

1.Gold & Precious Metals

2. Real Estate.

3. Crude oil.

4. Mutual Fund

5. Fixed Deposits

Investments Product

Gold is widely viewed as an inflation hedge - a reliable

measure of protection against purchasing power risk.

While precious metals in general are a solid bet, gold in

particular is seen as a hedge against uncertainty and a

store of value.

GOLD AS INFLATION HEDGE