How Does Gold Perform Historically as a Hedge Against Inflation? – Presented by Mark K. Lund, Financial Advisor in Utah

Financial Advisor UtahGold has been fascinating people for thousands of years.1 It never rusts or even tarnishes. And it’s soft enough to be worked into beautifully intricate designs.

No wonder ancient rulers wanted their crowns, scepters, and even thrones covered in gold.

Gold has been used as a currency for thousands of years. And in more recent times has backed the value of paper money.

Because it seems to have intrinsic value, this king of the precious metals is often touted as a hedge against inflation. It’s just common sense to assume that when the price of everything else is going up, so will the price of gold.

Several years ago, just as the pandemic was sending shockwaves through the economy, Donald Calcagni, chief investment officer at Mercer Advisors, did an analysis of gold’s performance against inflation over the past forty years.2 He found that from 1980-1999 gold lagged behind inflation. For 2000-2009 it performed very well, beating inflation by more than 10%. And for 2010-2019, it again came out ahead, but this time by little more than 1.5%.

However, when the four-decade period was taken as a whole, gold lagged by .54%. And over three of those decades it had price volatility that was greater than stocks.

During the high inflation of the past two years, gold fared much worse. Between 2020 and 2022 inflation increased 14% while gold fell 3.7%. In 2022, when stocks and bonds produced double-digit declines, in real terms gold fell by more than 5%.3

Claude Erb and Campbell Harvey in their 2016 study, “The Golden Constant,” concluded: “While gold might protect against inflation in the very long run, 10 years is not the long run. In the shorter run, gold is a volatile investment which is capable and likely to overshoot or undershoot any notion of fair value.”

As an illustration of gold’s ability to preserve value over very long time periods, it’s been said that an ounce of gold 2000 years ago could pay for a Roman centurion’s apparel. And that today that same ounce of gold can pay for a good suit of clothes for an executive. However, this comparison does not take into account the immense gains in productivity that technology has brought to modern garment makers. Today’s ounce of gold could not pay for a hand-sewn suit, made from hand-woven material, created from hand-dyed thread.

But despite its underperformance as an investment, there’s no denying gold’s popularity. The prudent investor should be on guard as each hiccup in the market gives gold touters another opportunity to sell more of it as a potential safe harbor.

The best protection against inflation is a broadly diverse portfolio, one that contains asset categories that move in somewhat dissimilar ways but tend, over the long haul, to outpace inflation. Talk to your trusted financial advisor about your best options for long-term success.

If you ever have any questions about your investments or retirement plans, please feel free to give me a call at 801-545-0696.

Mark Lund
Stonecreek Wealth Advisors, Inc.
11576 S State Street, Bldg. 1002
Draper, UT 84020


This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This material was prepared by Efficient Advisors, LLC (“EA’) for Mark Lund, Mark is a Financial Advisor in Utah. He is known as a Wealth Advisor, The 401k Advisor, Investor Coach, Financial Planner, Investment Advisor and author of The Effective Investor. Mark offers investment advisory services through Stonecreek Wealth Advisors, Inc. a fiduciary, independent, fee-only, Registered Investment Advisor firm providing investment management and retirement planning for individuals and 401k consulting for small businesses. Mark’s newsletter is called The Effective Investor Newsletter. Cities served in Utah are: Salt Lake City, Salt Lake County, Utah County, Park City, Murray City, West Jordan City, Sandy City, Draper City, South Jordan City, Provo City, Orem City, Lehi City, Highland City, Alpine City, American Fork City. The views expressed herein are exclusively those of Efficient Advisors, LLC (‘EA’), and are not meant as investment advice and are subject to change. All charts and graphs are presented for informational and analytical purposes only. No chart or graph is intended to be used as a guide to investing. EA portfolios may contain specific securities that have been mentioned herein. EA makes no claim as to the suitability of these securities. Past performance is not a guarantee of future performance. Information contained herein is derived from sources we believe to be reliable, however, we do not represent that this information is complete or accurate and it should not be relied upon as such. All opinions expressed herein are subject to change without notice. This information is prepared for general information only. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. You should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. You should note that security values may fluctuate and that each security’s price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Investing in any security involves certain systematic risks including, but not limited to, market risk, interest-rate risk, inflation risk, and event risk. These risks are in addition to any unsystematic risks associated with particular investment styles or strategies.