Real Estate, Gold Or Crypto: Which Could Be The Best Hedge Against Inflation?

On April 12th, the Bureau of Labor and Statistics revealed that the Consumer Price Index (CPI) had dropped to a yearly growth of just 5%. Because the CPI is the leading indicator of inflation, its decline from a height of 8.2% in March 2022 to 5% in April 2023 shows positive signs for consumers, but the battle is far from over. 

The Fed is committed to bringing inflation down to 2%. Many experts believe that the Fed will continue to raise interest rates to bring down inflation to this level, but recent outlier events have raised doubts about this expectation. The banking system’s fragility and geopolitical tensions have introduced complications to the Fed’s quantitative tightening policies. 

So long as the Fed continues to raise interest rates, the stability of the U.S. dollar and financial markets will likely be affected. This leaves investors contemplating the best avenue to protect their hard-earned cash from inflationary pressures.

Real Estate, Cryptocurrency And Gold As Potential Hedges

When it comes to hedges against inflation, real estate is often seen as a popular option. In the long term, housing prices tend to appreciate in most areas, making real estate a potentially valuable asset to hold onto. Additionally, commercial real estate has outperformed standard benchmarks like the S&P500 and Dow Jones over the past 25 years. Property owners can also raise rents on a yearly basis to accommodate for inflationary changes, further solidifying real estate’s position as a potential hedge.

Cryptocurrency, on the other hand, is a riskier hedge option. While some investors view it as a potential hedge, evidence for crypto as a hedge is notably weak. In 2022, for example, Bitcoin dropped over 70%, twice as much as the S&P500. Those wishing to use crypto as a hedge but escape volatility tend to explore pegged currencies like USDT or USDC. However, given the poor regulatory environment in crypto, these pegged currencies can become devalued (TerraUSD is a notable example). Additionally, most popular “stablecoins” are pegged to the U.S. dollar, so they’re technically not a hedge against the loss of purchasing power of the U.S. dollar.

Gold, on the other hand, has a long-standing history of serving as a safe haven asset during times of turmoil. In 2022 and 2023, gold vastly outperformed the S&P 500. Gold ended 2022 relatively breakeven, while the S&P500 dived 30%, and in 2023, gold is up roughly 10% compared to a smaller S&P 500 increase. A study conducted on precious metals shows that gold has seen price increases in a number of historical periods when the economy was weak, which further cements its position as a potential hedge against inflation.

Given the historical significance of gold and its perception as a safe haven asset, it would appear potentially the better hedge compared to real estate and cryptocurrency. For those interested in investing in gold as a hedge against inflation, Lear Capital is a potential destination to consider. Lear Capital is a reputable precious metals investment firm that specializes in gold and other precious metals. They offer a range of gold coins and bullion options for investors, as well as secure storage options for those who prefer to keep their gold in a secure location.

Click here for more on Lear Capital.

Featured Photo by regularguy.eth on Unsplash

This post contains sponsored advertising content. This content is for informational purposes only and not intended to be investing advice.