I’m trying to understand how Gold is a good inflation hedge. Here’s why.
If Gold is priced in USD and inflation in the US erodes the purchasing power of the USD, then surely if Gold is priced in USD, then wouldn’t gold be cheaper to buy?
For example, if the Gold Price is $100 and inflation increases in the US, $100 is still $100 if the price of Gold remains the same. So purchasing Gold at the price that it was ($100 US) would still cost the same.
I’m just not sure I understand the argument that because real purchasing power of the USD is eroded during periods of inflation then it takes more USD to buy gold. It would be the same amount of USD if the Gold price remained the same at $100 wouldn’t it?
I’m clearly missing a fundamental point there. Can someone explain it to me?