“1) Common sense says that gold is an inflation hedge, but this isn’t always true. We find that when real interest rates are positive, gold underperforms cash. Why pay storage costs to own gold if the interest on cash is higher than the rate of inflation? Additionally, gold is a global asset, so its price is sensitive to plenty of factors beyond a single country’s inflation rate.
2) I’m always surprised how often investors forget that plain old stocks hedge against inflation over the long-term. Of course, stock valuations may fluctuate with the economic news of the day, but across multiple business cycles market indices have significantly outperformed inflation.”