Every modern economy not only contains but requires risk to function. Stock markets are built on there being winners and losers, markets will rise and fall, and even the value of currency is constantly in flux. Inflation in general is a particularly interesting issue because of what it means for risk in modern markets.

Gold is a physical, tangible, and importantly finite material. It has been used as a more consistent asset throughout all of human and really world history. It represents market stability, low-risk, and typically, low reward. This isn’t always the case though,

Gold has the interesting quality of booming when the economy is busting. Or in other words - as the economy starts to fall apart, gold rapidly rises in value. This makes sense as the actual value of gold is always consistent, there is and always will be a finite amount of gold. The market value of gold, on the other hand, rises with inflation.

So when inflation is rampant, and the average consumer may be starting to struggle to buy average products, gold will return massive gains to investors. This has become a particularly relevant topic in the past few years, especially after the onset of the COVID pandemic, as inflation is skyrocketing.

2022, for example, has seen the second highest inflation rates in U.S. history. This isn’t inflation limited to the actual dollar either as energy and food prices have also boomed at massive rates. Gas prices have reached all time highs and while they have been on a steady decline, inflation at large seems to have no desire to slow down.

Looking at the predicted runaway inflation rates, the dollar could be worth as little as $0.65 in 2030 compared to the dollar of today. The U.S’s biggest advantage in stopping this? History. The U.S has seen high inflation rates before, has seen economic depression, and has seen people suffering. This should give some perspective and incentive for the U.S to do something about these issues.

The U.S’s biggest disadvantage? Also history. Inflation rates on things like milk, college, cars, these essential things have seen harsh exponential rises in the past 10-20 years. The economy is now a global system, and no country has the power alone to completely control it. It will take some serious cooperation between multiple nations to stop a trend that has been happening for up to 20 years.

Unfortunately, the past few years have done little to give confidence. COVID and 2020 saw gold reaching an investment return rate of 24.6%. A rate that is notably larger than the stock market's return rate of 18.4%. This meant that what is typically a safe and low-return investment became more profitable than the higher-risk and higher-reward stock market. 

And while this trend has not remained, it still goes to show exactly how far the pandemic really set behind the world economy. Economies are driven and created by risk, a system that incentives its consumer to take less economic risks is a system that is bound to decline. If inflation will slow or if gold will continue to grow is yet to be seen, but a surefire fact is that the U.S economy has a rocky road ahead of it.

In An Era Of Inflation, Gold Still Reigns Supreme
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About the Author(s)

Adam Torkildson

Adam is a long-time resident of American Fork, UT. He serves in several local service organizations and advises several startups that he's invested in or founded.

Owner, Tork Media

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