What Makes Gold A Good Hedge Against Inflation

Is it the fact that you cannot just print more of it, or is the fact that you cannot just print more of it?

FWIW, homes used to be a good hedge against inflation - until it got pumped up into a bubble.

Makes one wonder if the same could be happening with gold.

IMO, gold is little more than a speculative instrument nowadays.

Great for betting, some practical industrial use, but for inflation? Measured by who?

Why not buy oil futures contracts or an ETF that tracks oil price? Seems a better hedge.

Gold may be a good hedge against inflation, but the only reason is that there are a lot of market participants that perceive it to be so. If they perceive it to be so, then if inflation starts to rocket higher and CPI is hitting 3-5% and people are scared of inflation expectations going higher as well as the commodity complex going higher then that can generate bullish order flow into gold.

However, just because inflation numbers are running high that doesn't mean gold prices will automatically shoot up. You need to have other market participants coming to the same conclusion as you(that Gold is a hedge against inflation) and start generating bullish order flow into gold, AFTER you get into your position to make a profit. Hopefully, they come to that conclusion BEFORE your stop loss gets hit.

Just because you can't print more of it doesn't mean that it is automatically an inflation hedge. There are a lot of other investments/currency pairs that can perform well if inflation is running high. Commodity currencies can benefit from inflation if it is derived from strong global growth and subsequent interest rate increases in the commodity countries make those currencies attractive. In such a situation both gold and the commodity currencies would benefit. The difference from the two is that with Gold you can't print more of it, but with commodity currencies you can print more of them according to your beliefs. But in the end both would still benefit.

Hi everyone,

I would agree with grkfx on this but in my opinion gold is one of the safest investments. Let's look into the past. In all history gold was valuable thing, of course there was times when gold prices went down because of new countries where discovered with much more gold. But in the end gold is still valuable. But what about money? Money is always losing their value. But in the short period of time to get more wealth it is more convenient to speculate with money. Also I would like to add that raw materials is always more reliable then paper ones. (Of course then you should have where to keep it )

Best regards,
Ignas