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AAAU - Gold Is Not A Hedge Against 'CPI Inflation'
Goldman Sachs Physical Gold ETF
Editor's note: Originally published at tsi-blog.com on December 16, 2019.
Like old soldiers, old beliefs never die. In the financial world, one of the many old beliefs that clings to life despite a pile of conflicting evidence is the one about gold being primarily a hedge against, or a play on, so-called "CPI inflation."
The belief that big moves in the gold price are primarily driven by "price inflation" as measured by the CPI was spawned by what happened during 1972-1982. As illustrated by the following chart, there was a strong positive correlation between the