What is the relationship between inflation and gold?

It is an inverse relationship. As the money supply is increased, the price of gold will rise. Typically, investors use gold, or other commodities, as a “hedge” or “insurance” against a debased currency. read more

Other things being equal, the price of gold will keep pace with inflation because gold is a “real” asset (i.e. not a monetary asset). Some people will therefore argue that in times of significant inflation or rising inflation gold will be a much better investment than cash (i.e. fiat currency). read more

Gold’s average annual return (using average monthly price) from 1980 through 1986 as it followed the inflation rate down is a negative 10%; from 1980 to 2005 it is a negative 2%. Meanwhile, gold didn’t hit its average monthly high again until over twenty five years later when it began its recent bull run in 2006. read more

We first checked the relationship between year-end gold prices in the period of 1980-2009, and annual CPI inflation figures in the U.S by introducing a lag of seven years at a confidence interval of 95%. read more