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Why gold fails as inflation protection

By January 7, 2022March 25th, 20232022, ARD, Article, The Globe Echo

Why gold fails as inflation protection

Gold has many fans.

Especially among small investors, the yellow precious metal enjoys great popularity – also as a protection against inflation. But gold does not live up to its good reputation.

A widespread belief among private investors is that gold is an excellent inflation hedge. The reason is obvious: “Unlike paper currencies, gold has no central bank that can expand the supply at will by ‘printing money’ and thus dilute the value ,” explains Commerzbank commodities expert Carsten Fritsch.

Rapidly rising inflation
Consumer prices have recently risen massively, with the inflation rate in Germany soaring by 5.3 percent year-on-year in December. The last time there was such a rapid increase was 30 years ago. In the USA, consumer prices rose by 6.8 percent in November – the sharpest increase since June 1982.

One might expect the gold price to be a natural profiteer in such an environment. But far from it: the gold price fell by around four percent in 2021. Gold was thus the commodity with the fourth lowest return – only palladium, silver and platinum performed worse.

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Published: 07.01.2022 by Angela Göpfert, ARD / ARD is a joint organization of Germany’s regional public-service broadcasters

(Note: The original article is in German. This is a generic translation)

Article in ‘Globe World News’ (an independent english newspaper)