What I'm about to say might anger you...
But if you're holding gold as your only hedge against inflation... you're likely making a big mistake.
Many folks believe this common "myth" about gold: As the price of
everyday goods we buy rises, the price of gold will increase in
lockstep.
It makes some intuitive sense. But in reality, it doesn't work that
way... And there's a MUCH BETTER inflation hedge out there...
Take a look at the chart below. The black line is the price of
gold... The gray line shows increases in the Consumer Price Index (CPI).
It's the government's measure of inflation. And no, it's not perfect.
But it does show that prices increased from 1987 to 2004.
You can see that during 17 years of inflation, as consumer prices were increasing, gold prices went nowhere.
Over my investing lifetime, the only great time to own gold has been when real returns on fixed-income securities turned negative... For example, when inflation has been more than interest rates on U.S. Treasurys, gold has been a great asset to own. (more)
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