As the Federal Reserve prepares to cut rates, global economy faces a slowdown and tensions flare in the Middle East, the safe haven,
inflation hedge and store of value is performing admirably," Craig Erlam, Senior Market Analyst, UK & EMEA at OANDA said.
Gold, a traditional
inflation hedge, however, lost 5% in price since the election and silver fell almost 9%.
"The primary reason for investing in commodities should always be as an
inflation hedge. Given the continued printing of money by the world's central banks, there is every reason to argue that higher inflation is coming in the future.
Because some of these plans have added their
inflation hedge during a low inflation rate in the second part of 2014, and utilizing the interest rate hedge in the first quarter of 2015 as nominal rates rose they were able to obtain enticing general returns.
"And with that current return comes an
inflation hedge, a good prospect of higher value, some modest tax shelter, and a potential estate-planning tool that may provide a step-up in asset value to heirs.
And since the introduction of index-linked government bonds, any merits it might have as an
inflation hedge have become less relevant.
During the 1974-2008 period, there were eight years in which inflation exceeded the 5% value in the United States; the average gold return for these high inflation years was 14.9%, making gold the most efficient asset as an
inflation hedge. The results show that, even in low to moderate inflation periods, investments in gold provide benefits to a portfolio, due to the diversifier effect and lower average volatility.
Akin to buying homeowners insurance before a house fire starts, the value of owning an
inflation hedge is greatest before the price of the hedge goes up--that is, before an increase in the inflation rate.
REITs provide either no
inflation hedge or a perverse
inflation hedge in the short run.
Doing so provides an
inflation hedge and funding options should a long-term-care need arise, all while enjoying a reliable stream of income.
According to the firm, the fund seeks to deliver higher risk-adjusted returns than traditional long-only real estate strategies, while also potentially providing an
inflation hedge and a durable stream of income.
Traditionally, investors turn to gold in times of turmoil as an alternative store of wealth to equities and the dollar and as an
inflation hedge. Until 2003, most held gold bars, coins or jewelry in vaults or bought futures and options.
