GOLD AS AN INFLATION HEDGE: A COMPARATIVE STUDY OF SIX MAJOR INDUSTRIAL COUNTRIES

This study considers whether or not gold has been an effective hedge against inflation for investors in six major indusrial countries over the period 1975 to 1980, Gold is considered a hedge against inflation if changes in the returns on gold investments systematically offset changes in the general price level of a particular country. The results indicate that gold has only been an effective hedge against US inflation, and only over one and six month investment holding periods. When the actual inflation rate was decomposed into an expected and unexpected component, it was again found that only US investors could hedge themselves against inflation using gold.