Inflation, the gradual increase in the general price level of goods and services, erodes the purchasing power of fiat currencies over time. As inflation rises, investors seek assets that can preserve their wealth and purchasing power.
Gold has long been revered as a hedge against inflation due to its intrinsic value, scarcity, and historical role as a store of wealth. During periods of high inflation, gold tends to appreciate in value, serving as a reliable safeguard against the erosive effects of rising prices. The 1970s witnessed a period of stagflation, characterized by stagnant economic growth and high inflation.
During this time, gold prices soared, reaching record highs as investors sought refuge from the ravages of inflation and economic uncertainty.
In the wake of the Global Financial Crisis of 2008, central banks implemented unprecedented monetary stimulus measures to stimulate economic growth and combat deflationary pressures. These expansionary policies have raised concerns about the potential for future inflation, driving demand for gold as an inflation hedge.