Discussion board 300-350 words | Business & Finance homework help
Explain the difference between “hedging” and “speculating” by explaining why someone who wishes to “hedge” against inflation might choose to purchase gold.
Hedging is a strategy used to reduce the risk of loss from changes in prices or values. It involves buying and selling securities, commodities, or other instruments in order to protect against potential losses due to price movement. A person who wishes to hedge against inflation might purchase gold because it tends to retain its value over time and can be sold for profit if the value rises.
Speculating, on the other hand, is more aggressive; it involves taking a risk with investments in hopes of earning higher returns. With speculating, investors are hoping that prices will go up but there is no guarantee they will do so.