Gold as a safe-haven asset and a hedge against inflation

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Is this precious metal suitable for protection against uncertain times?

In times of economic strain, gold is frequently described as a “crisis metal” – as if this heavy, yellowish, gleaming metal possessed magical powers. The authors of the Reisebank study “Gold in a Portfolio Context 2025” believe this statement holds true. Their analysis, commissioned by renowned German precious metals dealer Reisebank, outlines the current benefits of investing in gold—through the prism of various research hypotheses. One hypothesis posits that gold provides protection against inflation and security during times of crisis. But why is this? And can this assumption be substantiated?

Disclaimer

This article does not constitute investment advice and cannot replace a personal assessment by your professional financial advisor. It serves as supplementary information for individuals planning to purchase gold or other precious metals as a hedge against inflation.

Overview: Gold investments used for security during economic crises and to combat the effects of inflation

Protection against inflation and global economic crises via gold is a key hypothesis and central component of the Reisebank study "Gold in a Portfolio Context 2025."
The study’s authors analyse how gold is frequently viewed as a "safe haven" during periods of economic strain, and used to protect capital wealth from loss or devaluation.
Gold’s status as a shield against inflation is attributed to its unique properties—which ensure high value stability—and to the diverse sources of market demand.
Since 1972, the price of gold has remained independent of currency fluctuations. In 2025 alone, the value of gold rose by more than 50 percent.
Historical instances of high inflation coinciding with rising gold prices both demonstrate this precious metal's importance and underscore its suitability as a crisis asset.
Confidence in gold as a protective asset is deeply rooted, particularly among the older generation; however, younger investors too are now considering gold investments.

Is gold a universal remedy for destabilising crises?

The hypothesis that gold offers protection against inflation and global crises—as presented in the study “Gold in a Portfolio Context”—is based on the premise that gold serves as a stable store of value, especially during times of economic uncertainty. Unlike national currencies, which can lose their value due to central bank measures, gold remains an independent physical asset. The research notes that, historically, gold has consistently played a stabilising role during periods of high inflation and market uncertainty.

The study’s authors—Prof. Dr. Jens Kleine, an expert in banking management and finance, and Dr. Tilmann Gerhards, a board member at Reisebank AG—also point out in their assessment that this conclusion cannot necessarily be universally applied. Whether gold is generally suitable as a hedge against inflation and a safe-haven asset depends heavily on the prevailing economic conditions and on the specific time-frame under consideration. While there is no doubt physical gold fulfils its protective function during times of high inflation and uncertainty, its performance can also vary during periods of economic stability. Consequently, the authors argue that gold should always be viewed as one component of an investment strategy rather than as a sole means of hedging against inflation and seeking protection against global crises.

The Performance of Physical Gold

At this point, some readers might question the actual performance of gold. After all, this precious metal generates neither interest nor ongoing investment income. The value of physical gold is thus determined simply by supply and demand. Consequently, the price of one troy ounce of gold (31.103 grams) is negotiated daily on international markets in this context, and initially quoted in US dollars. This daily gold price is then subsequently converted into local currencies—such as Swiss francs, euros, or British pounds—using the currently prevailing currency exchange rates.

A look at the historical price trend of gold will help to explain further: Until 1971, the gold price was pegged to the US dollar—creating what was then the ’gold standard’. So the independent evolution of the gold price is only really a relevant concept from 1972 onwards. At the start of this free-market trading, a troy ounce cost just 110 US dollars, compared to a previous fixed rate of 35 USD. Significant price surges occurred in the 1970s and again from 2007 onwards during the global banking crisis, when gold’s market value suddenly climbed to around 1,900 USD. Since then, the price of this precious metal has recorded sharp increases whenever an economic crisis loomed, or when inflation was particularly high. Well-known examples include the coronavirus pandemic starting in 2019 and the geopolitical conflicts in Ukraine and the Middle East beginning in 2022. In October 2025, the gold price even exceeded the 4,000-dollar mark for the first time. In 2025 alone, the value of gold rose by more than 50 percent against most other currencies.

According to experts, political crises are predominantly considered the triggers for these price gains. High demand from private investors at such times stems from concerns about capital loss and the need for inflation protection, while central banks also seek to purchase gold as a currency hedge.

So what is inflation?

Inflation refers to a general and sustained rise in the price of goods and services. This reduces the purchasing power of money, which means consumers can thus afford less. And in addition, the value of savings can decline if interest rates are not adjusted to keep pace with these inflationary trends. Inflation is primarily caused by an increased demand which outstrips supply. This can soon drive up production costs, which are subsequently passed on to the consumer.

An increase in the money supply as a direct result of economic stabilisation measures implemented by central banks can also trigger inflation. Other contributing factors include political events, geopolitical incidents, disrupted supply chains, or the limited availability of raw materials. The inflation rate is measured by calculating the change relative to the same period in the previous year, or in the previous month, and is expressed as a percentage.

In the wake of the coronavirus pandemic and the strained energy situation caused by the war in Ukraine, inflation in Germany rose to 7.9% in 2022. The price of gold climbed by roughly the same margin during this period, helping to somewhat mitigate the loss of purchasing power. By comparison, Switzerland recorded an average inflation rate of just 2.8% in 2022, while the Eurozone averaged 6.4%. Meanwhile, extreme rates ranging from 30 – 100% were recorded in South Sudan, Egypt, Turkey, and Argentina.

How can gold offset the effects of inflation?

Faced with rising living costs and the desire to prevent the devaluation of their assets, many people purchase physical precious metals in the form of gold bars or gold coins. But what is it that enables gold to counteract the consequences of inflation? The authors of the Reisebank study have concluded that gold possesses several key characteristics that mark it as a stable and reliable asset. One of this metal’s fundamental properties is that its supply cannot be increased indefinitely because its limited occurrence in the Earth’s crust makes it a finite material. This characteristic is reinforced by the high costs associated with both the primary extraction of gold and any subsequent gold reclamation and recycling. According to Kleine and Gerhards, these features create a natural price floor.

Another factor which favours gold is the enduring high global demand for the metal. Gold has some diverse applications: According to the World Gold Council, at over 50% usage, the jewellery industry alone accounts for by far the largest share. Elsewhere, investment demand accounts for another 26%, while central bank purchases make up around 13%. Furthermore, gold is also regularly used in industry, and in the technological and medical sectors. As the authors explain: “It is precisely this versatility that contributes significantly to gold’s enduring value.” This also helps to understand why, beyond gold’s purely monetary function, many people also consider it a “safe haven” during times of crisis.

Another argument for gold as a hedge against inflation is its independence from the fiat currency system. This means its value is not tied to any specific currency but can fluctuate freely. For instance, if the value of the US dollar falls due to inflation, gold still retains its value. In fact, when driven by investor demand, the price of gold often rises in such situations.

Is deploying gold as an inflation hedge also a generational strategy?

The authors of the Reisebank study also examined how the age of investors influences their investment behaviour. An analysis of their survey results revealed that older generations in particular view gold as a safe haven during times of uncertainty. By contrast, younger investors in the 18-24 age range tend to favour digital alternatives such as the Bitcoin cryptocurrency. Nevertheless, this same age group also demonstrated a significant willingness to purchase gold for the first time—a willingness that then tended to increase steadily with age, while interest in Bitcoin simultaneously declined by a similar margin.

Conclusion: Gold demonstrates its ability to retain value during inflation and times of crisis

In the Reisebank study, experts Kleine and Gerhards conclude that gold maintains its value well during inflationary periods, even over the long term. In fact, a parallel increase in value can even be observed during times of very high inflation. However, the body of research on this matter is not entirely conclusive, given there are also some dissenting views. Historically, the gold price has often held its value, or even risen, during periods of high inflation. Thus, gold as an investment can provide a substantial safeguard against the effects of inflation. The authors also noted a similar trend regarding gold’s role as a safe-haven asset: in times of economic uncertainty—particularly in the geopolitical sphere—the resulting anxiety among market participants drives increased investment in gold. Research has thus repeatedly confirmed gold’s effectiveness as a short-term hedge against such crises.

One further note on this: The hypothesis that “gold can be a hedge against inflation and crises” is just one component of the meta-study “Gold in a Portfolio Context.” The author’s full analysis examines the value of gold within a broader framework. Considering all aspects, the study suggests a gold allocation of 5 to 16% of a total portfolio, which otherwise may comprise various asset classes such as equities, funds, and real estate. In this context, the physical precious metal serves primarily to minimise the risk associated with other, more speculative products.