16 February 2011

Is Gold a Hedge against Inflation?

I notice today that in an interview an asset manager stated that Gold was not suitable as a hedge against inflation. The manager - let him remain unnamed - picked the year 1980 when Gold reached a temporary all-time high of more than $US 800 as the base period and claimed that in real terms even Gold at its current price of around $ 1350 has not held its ground against inflation. But you can prove anything with statistics. If the comparison were made with the price of $US 35 on which the price was fixed by the US Government until the early 1970s the comparison would be very different. A look back to 1792 shows that gold more than held its own in real terms since then.