Gold is an awful inflation hedge, here’s a better one

I see gold commercials on TV daily. Gold is a hedge against inflation because it is a commodity and not USD-denominated. In that, it is no different from silver, and in a broader sense, it is no different from any commodity like wheat or oil or molybdenum or palm oil. I have gold and silver bullion coins. Those have relatively low weight and volume per $1,000 and do not spoil like wheat or oil or iron ore.

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I urge you to take delivery of the commodities in which you invest. That means you physically possess and store them. Tight-assed financial advisors prefer that you trade options on them. Do not do that. They are a complicated mess.

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Regarding gold, It’s long-term adjusted-for-inflation price appears to be in the $600s. Current price for a gold eagle coin is $2,135. I say that means it is too expensive.

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In contrast, you can buy US nickels and pennies for their face values. Their melt-value-to-face value ratios are 106.8% (US nickel) and 64.4% (post-1982 penny). Coinflation.com

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True, they are bulkier than silver and gold, but not impossibly bulky.

$10,000 of gold is less than five Gold Eagle coins

$10,000 of silver is less than a half bag of pre-1965 dimes, quarters and half dollars. A bag is defined as $1,000 face value.

$10,000 of nickels is 100 boxes 9 1/8" x 4 1/2" x 3 1/2" each (5 boxes wide x 5 boxes deep x 4 boxes high or 9 1/8 x 5 = 45.625 in. wide 4.5 x 5 = 22.5 in. deep 4.5 x 4 = 14 inches high). Roughly speaking, that would about fill a standard, five-foot modern bath tub. It would weigh one long ton.

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Is the current real price of nickel above its long-term average? Here is a historical graph: https://tradingeconomics.com/commodity/nickel Select “all” to see the maximum number of years. The current price looks like the historical long-term price. Actually, those are nominal prices (not adjusted for inflation), so the real price has FALLEN over time. You could buy a metric ton of nickel for $10,000 in 1990. In today’s dollars that would be $24,000. Today’s price is $18,000.

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Is a gold eagle coin a better hedge against USD than nickels? No. Nickels are far better because their current face value—your purchase price—is actually LESS than their melt value and about equal to their long-term purchasing power.

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Gold is a particularly lousy hedge against inflation, but the dumb public has heard gold is good for inflation and they know nothing else and utterly lack any method to evaluate alternative hedges.

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How do you buy a $100 box of nickels? Walk into your bank and give them $100. Some branches will refuse. Others will hand you the box.

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One more thing, It is not enough to buy gold before hyperinflation starts. You also have to sell it all before it ends. Think about it, gold is almost useless other than as a hedge against inflation. Hyperinflation always ends and it always ends overnight. When it does, the value of gold will fall to BELOW its long term average price in the $600s. With nickels, you do not need to worry about that because you did not pay more than the long-term average price.