Gold is sometimes touted as a tool for protecting wealth from rising prices. But history shows the challenges of using gold to offset the impact of inflation.

Since 1970, gold has often experienced large price swings relative to annual inflation, as Exhibit 1 shows. An effective inflation-hedging tool should have return volatility that is more on par with changes in consumer prices.



Annual US Inflation Rate vs. Change in Gold Price


It’s reasonable to be concerned about rising consumer prices, but investors who want to closely track inflation may find gold to be the wrong tool for the job. Using Treasury Inflation-Protected Securities (TIPS), whose values adjust with annual inflation, may be a more reliable approach.

Financial peace of mind amid uncertain market conditions and inflation risks can also be achieved with a comprehensive plan. You can trust Prosperity Capital Advisors to develop a holistic wealth management plan that helps you mitigate risks while continuing to grow and protect your wealth.




US inflation is the annual rate of change in the Consumer Price Index for All Urban Consumers (CPI-U, not seasonally adjusted) from the Bureau of Labor Statistics. Returns are in USD. Indices are not available for direct investment.

Gold spot price returns are provided by Bloomberg. Bloomberg data provided by Bloomberg.


Investments involve risks. The investment return and principal value of an investment may fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original value. Past performance is not a guarantee of future results. There is no guarantee strategies will be successful.


Prosperity Capital Advisors is a planning-first RIA that helps clients protect their wealth, against changing market conditions and inflation risks. We have a nationwide team of professionals who are dedicated to serving clients’ unique needs and aspirations. See our full list of advisors by clicking here.

This blog was created and published by Dimensional Fund Advisors. Learn more about Dimensional Fund Advisors here. The original post was published on May 21, 2024 , and can be found here.