Gold Rate Falls Above 8% In 2022, Should You Consider Gold As Hedge Against Inflation Anymore?

Gold rate in the Comex December Futures falls by 8.47% in 2022. With the high inflationary pressures, major central banks, including the US Fed have been gaining interest rates. It is keeping the US Dollar index and bond yield higher, putting the commodities like gold and silver under a bear zone. On October 11, the Comex gold rate fell as low as US$ 1,667.50/oz.

Historically gold has been considered a hedge against inflation, a safe haven during times of uncertainty. But this time the precious metal is trading against the script. Inflation has risen to levels not seen in the past few decades in the US, European countries, and also EMs like India. The central banks across the globe are hiking rates to rein in inflation.

Amid high inflation, and economic uncertainties around the globe, gold has been largely trading range-bound, the trading range has been $1630 and $1740 for the past 1 month. It is currently trading around $1690-1700/oz. It is widely expected that in the near future gold may remain in narrow ranges.

However, should you consider gold as a hedge against inflation anymore? Commenting on that matter, Emkay Wealth Management, "The only factor which gives some potential for strength to gold at this point in time is the occasional talk of gold as a hedge against inflation and uncertainties. But this property of gold as an asset class has been undermined to a large extent as evidenced by the fact that despite inflation has been very high in the US, Europe, and other territories, gold has not picked up."

"The rise in the US interest rates and the likelihood of the hawkish stance of the Fed converting itself into rate hikes which may go well into the next year as well may keep gold prices at the lower end of the range. The current spell of gold weakness may continue till there is more concrete information on the state of the economy in the major economies, especially against the background of an aggressive central bank trade-off unfavourable to growth and promoting stability," Emkay Wealth added.