On hedging inflation with gold

This is not where it’s at

Gold is not a good inflation hedge. Yes, it has been touted as one in the past and continues to be touted as one now, but there is little evidence supporting the claim.

What’s more, it is rare that any wealth manager or gold bug or purveyor of such an idea will tell you why or how the yellow precious metal is an effective hedge. The argument is typically presented as nothing less than a simple statement of fact, a truth everybody should already be familiar and comfortable with, something that can even be considered self-evident.

If any reasoning is provided at all, it might sound something like this: Fiat currencies are not backed by anything anymore, unlike before when they were backed by gold. Hence, as central banks the world over pump paper into the system to salvage their ravaged economies, it is inevitable that they will ultimately devaluate their own currencies and trigger inflation in the process; they will overdo it, make a misstep, screw up.

People will “wake up” and realize that paper is just paper, that the overzealous “printing” of it has created an overabundance of it in the hands of humans chasing too few goods, and that same general public will lose confidence en masse in their central bankers and in the currencies they have been (mis)managing. As…