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Why gold is not the best hedge against inflation

Posted by John Reed on

FreedomFest head Mark Skousen recently wrote about gold as an inflation hedge. I sent him this email:
A couple of points:
A. Gold is not a good inflation hedge because it’s gold, but rather because it is a commodity. A diversified portfolio of durable commodities like junk silver, current US nickels or pennies, gold coins, etc. should be better than gold because of the anti-gold discrimination points in my web article. Also, I recommend taking delivery of coins, not buying options or mining company stock. Gold must be kept OUTSIDE of the US because of the threat of another EO 6102.
B. Chinese and other foreigners are or were big gold buyers. They have been taken out of the market by XI et al. lately.
C. The best hedge against inflation would be whichever asset is a flat line when you graph its REAL price. The real price of gold has NOT been a flat line, mainly because of lack of diversification. I think the “asset” that does that is a diversified commodity portfolio—almost by definition.
D. The CPI has become less useful by the year as the BLS keeps modifying it to make the President look good or less bad. We need a better CPI more than we needed your better GDP—GO. The Fed plays a similar game in interest rates and money printing.
How to Protect Your Life Savings From Hyperinflation & Depression , 2nd edition book

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