Inflation vs gold price

Gold is historically considered the best hedge against inflation. Since the abandonment of the gold standard in 1971, the purchasing power of the US dollar has declined by over 85%, while gold has seen its price multiply by more than 60. In Switzerland, cumulative inflation since 1971 has been more moderate (~250%), but gold in CHF has nonetheless significantly outperformed.

The correlation between inflation and gold price is not instantaneous but trend-based. During periods of disinflation (1980s-2000s), gold stagnated or declined. During inflationary surges (1970s, 2021-2024), gold strongly outperformed bonds and money market instruments. The key mechanism: when real interest rates turn negative (nominal rate < inflation), gold becomes more attractive as its opportunity cost decreases.

For a Swiss investor, gold serves as an 'intergenerational store of value'. A 20-franc Vreneli bought in 1947 (face value CHF 20) is worth over CHF 450 in metal value alone today. During the same period, CHF 20 in cash would have lost over 80% of its purchasing power. This empirical observation reinforces gold's status as an anti-inflation insurance.