Mike Kerins Published on Seeking Alpha: Gold is a Terrible Inflation Hedge

  • Gold has not been a great inflation hedge in the last 35 years.
  • Cash (3-month Treasury Bill) has been a better inflation hedge.
  • Gold has underperformed inflation by almost 100% over the last 35 years.
Every time someone tells me they are buying gold (NYSEARCA:GLD) because of inflation fears, I cringe. First, I don’t see a risk to higher inflation – we have an oversupply of manufacturing capacity globally (millions of cheap workers in emerging markets) and an oversupply of commodity production (U.S. shale, Australian coal…). Second, even if we have high inflation, don’t count on gold as a hedge. Looking at the last 35 years of data, gold underperforms as three-year cumulative inflation approaches 12% or higher.
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