NEW YORK (Commodity Online): Gold is unreliable as a hedge against inflation, a new study published by Credit Suisse and London Business School shows. The study covers a 112 year time period.
Gold prices are too volatile to be reliable and the fact that it has no yield or income flow mean that gold has returned far less than equities over the time period. Global equities were the best performers with a 5.4% annualised yield and also succeeded in beating inflation.
Gold is the only asset that does not have its real value reduced by inflation. It has a potential role in the portfolio of a risk-averse investor concerned about inflation. However, this asset does not provide an income flow and has generated low real returns over the long term. Gold can fail to provide a positive real return over extended periods”, the study states.
Even though the study does state that gold has been a failure over the 112 year period, it should be noted that gold has been one of the best returning assets of the past decades, easily beating US equity indexes by a long way.
