It's frequently argued that gold is a great hedge against calamity... but not actually a great inflation hedge, which is how it's frequently advertised.

Jason Ruspini begs to differ, pointing out that most critics of gold tend to use the elevated (and arbitrary) 1980 peak.

"Not inflation", the gold critics will shout, in one of their go-to arguments. This is what we hear from CNBC's Mark Haines at every possible chance -- since 1980, gold has not kept up with the CPI and so shouldn't be used as an inflation hedge.

One would point out to Mark that this is analogous to arguing for global cooling based on that one 2005 start date. If you pick basically any other start date but the one corresponding to gold's 1980 peak, you see something different, even giving CPI a long head start over floating* gold prices...

Hedging Inflation:  Consumer Price Index vs. Gold  (Aggregate values through December 2009) Since... CPI Gold  Gold/CPI January 1955   808.3% 3,129.5% 3.87 January 1970   476.9%  3,113.9% 6.53 January 1975   320.1% 514.8% 1.61 January 1980   185.0%  143.8% 0.78 January 1985   105.4% 254.2% 2.41 January 1990   71.8% 176.3% 2.45 January 1995   44.5% 197.8% 4.44 January 2000   28.5% 298.5% 10.46 January 2005   13.3% 155.6% 11.74

*[Editor's note: For the study period preceding 1971, gold's price (and hence, its performance) was artificially flat as defined by the 1945 Bretton Woods Agreement Act establishing the international gold exchange standard at $35/ounce. In a surprise-announcement on August 15th 1971, U.S. President Nixon terminated this fixed dollar/gold convertibility, effectively shutting the window on the past, but opening a door to the modern era of floating prices for gold on the global market. For more detail on gold's most recent decade in the context of it's entire floating (post-1971) era, click here.]

Reprinted with permission.

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