Gold as an Inflation Hedge: What You Need to Know

November 25, 2022

The value of gold and inflation are directly intertwined. When the purchasing power of fiat currency diminishes, many savvy investors look to gold to protect their wealth and add stability and diversification to their financial portfolios. A historical store of value, gold has proven itself time and time again to be a safe haven during stormy economic conditions. 

If you’re considering investing in gold, you must understand why the precious metal consistently performs well during periods of economic downturn. That way, you can make an informed purchase based on your current needs and outlook on the future. Read on to learn about gold’s inflation hedge abilities and why it should be a core part of every investor’s portfolio.

What Is Inflation?

When prices rise, the purchasing power of fiat money falls. Goods and services cost more than they did during a healthy economy. So you end up spending more of your income without any change in what you’re buying. You’re paying for more, but you're not getting more.

Inflation affects not only fiat currency but also the value of your assets. For example, say you invest in a stock that delivers a 4% return. If inflation is at 5%, you’re actually losing 1% of your investment. 

Inflation can diminish the value and liquidity of your physical assets too. In contrast to gold which has proven its ability as a hedge against inflation and retained its value, you may struggle to convert other investments to cash if the need should arise. That’s why gold and inflation are so closely related. Gold tends to grow in value during inflation while other assets falter.

Why Investors Turn to Gold

Simply put, gold has earned its reputation for staunch dependability. Since ancient days, gold has been trusted as a true currency, and it has only become more and more desirable over time. Gold is a finite material that has many important use cases, not to mention its rarity and unparalleled beauty. 

Century after century, gold has acted as an inflation hedge, even during the most tumultuous economic conditions. While the price of gold is bound to waver from time to time, just like any other asset, it’s simply unparalleled as a stable store of value. People trust gold. They know that it’s always going to bounce back. And many seasoned investors view gold price drops as ideal buying opportunities.

True Intrinsic Value

A stack of large gold bullion bars

Paper is just that — paper. It has value because society agrees that it has value. While that same principle certainly applies to gold as well, gold possesses inherent worth that goes far beyond social constructs. When people (justifiably) lose faith in paper money, they see that gold and inflation are directly correlated for good reason. They recognize that gold’s inflation hedge brings stability to their finances because there is a legitimate demand for it.

So, what makes gold so valuable beyond our belief in it? Fine art, rarity, scarcity, and beauty play a significant role in gold’s desirability, but that’s just the start. Of course, we all know those with an eye for luxury will always covet gold jewelry and collectibles. But gold also possesses unique physical properties that make it highly demanded by the electronics, medical, automotive, aerospace, and defense industries, to name a few. 

In short, the global demand for gold isn’t going anywhere.

Dependable Purchasing Power

Gold’s inflation hedge abilities ensure your wealth doesn’t disintegrate over time. We can simply look to the past for concrete proof that gold retains its purchasing power even while the value of fiat money falls. In the 1920s, an ounce of gold was worth around $20 — roughly the cost of a nice business suit. One hundred years later, an ounce of gold will still buy a high-end suit. Today, you’ll be lucky if $20 in paper money buys a decent pair of socks!

Supply and Demand

Gold is a finite resource — when it’s gone, it’s gone. Of course, it’ll be a very long time before gold is unattainable, but the supply does have a limit. 

Many investors add gold as an inflation hedge to their financial portfolios because they understand its unceasing and ever-growing demand. This gives gold tremendous long-term potential as a reliable store of generational wealth. 


Due to the relationship between gold and inflation, gold owners have peace of mind knowing that even if inflation worsens significantly over the years, they won’t have left all of their eggs in one basket, as the old proverb goes. Having a diverse financial portfolio is absolutely crucial, as it’s impossible to predict what the future holds. We can, however, look to the past for indicators of which assets perform best during times of economic uncertainty.

No financial portfolio is complete without gold as an inflation hedge. You wouldn’t invest all your earnings in just one stock, right? After all, if that company falters, you’ll lose everything. While any investment — including fiat currency — comes with its share of risk, gold is far less volatile. Gold isn’t a company that can fail; it’s not a trend that comes and goes. Gold is arguably the safest investment available, so it’s truly a must-have in any well-diversified portfolio.


A variety of gold bullion coins from all over the world

Don’t underestimate the power of a passionate community of collectors to keep demand high! Many gold enthusiasts enjoy the hobby aspect of gold investing, accruing their favorite bullion bars and coins from all over the world. Building a gold inflation hedge is much more exciting than buying stocks, bonds, and other intangible assets. Some bullion coins become highly desirable numismatics as they increase in rarity and scarcity.

Retirement Planning

Because of the unique way that gold and inflation interact, many investors turn to gold as a major portion of a long-term retirement plan. While purchasing physical gold is a very popular option, some investors choose to open a precious metals IRA to grow their nest egg and secure their financial future. Opening a precious metals IRA is easy, and you can even transfer a portion of your existing IRA into one.


The great thing about a gold inflation hedge is that you have virtually instant access to fiat money if you should ever need it. Unlike many other physical assets, a buyer will always be eager to purchase your gold. In contrast, other tangible investments — fine art or houses, for example — can take years to sell, and there’s no guarantee that you’ll receive your asking price. 


A man buying gold online

You can buy gold online or in-store just like any other product. Precious metals are by far the most beginner-friendly investment vehicles. You don’t need any in-depth technical knowledge to get started. Simply choose the gold products that appeal to you, and buy them. Building a gold inflation hedge is also an ideal option for those who prefer to invest in increments over time. Simply spend what your budget allows, when it allows.

Talk to a Precious Metals Expert Today

Now that you better understand why gold and inflation are so closely tied, why not take the next step to secure your financial future? Endeavor Metals is a Tier 1 United States Mint-authorized dealer with over 50 years of in-house experience. We’ve helped countless clients grow their investments, earning us a 4.9 Google star rating and an A+ accredited grade on the Better Business Bureau. 

Before buying gold as an inflation hedge, it’s absolutely critical that you take the time to plan your investment. We encourage you to contact us or visit our South Florida store for a free consultation with one of our knowledgeable precious metals experts. We recognize that every investor has their own unique financial goals, requirements, and preferences. We never take a one-size-fits-all approach, instead catering to each individual on a one-on-one basis.

Shop Gold Products With Confidence

Endeavor Metals belongs to numerous trusted organizations, including the prestigious Silver Institute, the Industry Council for Tangible Assets, the American Numismatic Association, and the Certified Acceptance Corporation (CAC). 

Ready to buy gold as an inflation hedge? Browse our bullion gold coins and gold bars to find world-class products at competitive prices. We also carry gold numismatics if you’d prefer to invest in rare, commemorative, and low-population coins. All Endeavor products are backed by our 7-day, 100% money-back guarantee, even if the gold market has a downturn. Shop with confidence.

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