Should I Buy “Digital Gold” For Inflation?

Jerome Powell, Fed chair extraordinaire, is likely to announce interest-rate hikes in 2022 to combat inflation, which is at record levels and climbing: Consumer prices were up 6.8%, year-over-year, in November!

This is a difficult situation for stocks. Not all companies can quickly and easily pass along higher costs to consumers, so inflationary headlines tend to spook the market. That leaves us with two choices: Watch inflation take its toll on our investments as well as our credit-card bills… Or buy assets that keep us a step ahead of inflation.

Sure, the Fed’s whole move is intended to fight inflation – but Powell admits that “supply and demand imbalances…have been larger and longer lasting than anticipated, exacerbated by waves of the [COVID-19] virus.”

“As a result, overall inflation is running well above our 2% longer run goal and will likely continue to do so well into next year,” Powell concedes. In fairness, the culprits he’s naming as the cause of elevated inflation numbers are pretty far outside the central bank’s control.

This is the market environment when your dad or your grandpa might start buying gold. Younger investors, however, are looking at Bitcoin (CCC:BTC-USD), which shares some key characteristics with gold. In fact, it may actually be a better inflation hedge, depending on your timeframe, as we’ll get to later.

Interestingly – while the Federal Reserve did not weigh in on Bitcoin with regard to inflation – Powell does seem to be coming around on cryptocurrencies in general (and stablecoins in particular). Here’s what he said in Wednesday’s press conference:

“The concerns [with cryptocurrency] are not so much current financial stability concerns… Stablecoins can certainly be a useful, efficient, consumer-serving part of the financial system, if they’re properly regulated. Right now, they aren’t. And they have the potential to scale… and you could have a payment network that was immediately, systemically important… In terms of the cryptocurrencies that are really speculative assets, I don’t see them as a financial stability concern at the moment.”

Powell did also stress that you should “understand what [you’re] getting” before you buy. To that end, here’s a closer look at how Bitcoin compares with the more traditional inflation hedge – gold.

Credit to@ investorplace

Leave a Comment

Your email address will not be published. Required fields are marked *