Can Gold be an inflation hedge?

Rising Inflation has put gold back on the radar for Investors looking for a protection from emerging price pressures, but history says its reputation have been overstated. The experience of last 50 years explains that Gold has been a better barrier against inflation shocks-this thing can be completely seen at the times of financial crisis which usually have inflation shocks.

"if you strip out the 1970's you will find the relationship between gold and inflation is quite week," Brian Lucey, professor of international finance at trinity college Dublin, said."That is because you have a very different inflation regime in the late 1980's and 1990's than you had in 1970's."

"That was the time when inflation rates of double digit and higher were the norm.We're not going back to that."

"If yo want to cover inflation expectations, you just buy a bond - It's very straightforward,"

Campbell Harvey, professor of finance at the fuqua school of business, Duke University, said.

"However that does not work for unexpected inflation - this is inflation linked bond is needed."

Harvey's research into gold link with inflation shows that while the metal holds its value over the extremely long run - Roman soldiers' wages, expressed in gold, are similar to modern day U.S military pay. Indeed, Gold has reacted little to recent price pressures. As the five year U.s break even inflation rate hits its recent in a year in the last month, gold sagged as the dollar pulled of recent lows in anticipation of higher interest rates. People now a days have a plenty of alternatives to protect themselves from inflation from real estate to bonds but still gold is preferred a lot as a hedge to Inflation and much convincing to the consumers.

"Because gold is perceived inflation hedge,we will still likely see some allocation into gold leading up to inflation moving higher," Standard charted analyst Suki cooper said.