Commodities and Inflation: Why Gold Still Shines During Inflationary Periods

7 September 2025

Let’s be honest: inflation can feel like a slow leak in your financial tire. Prices rise, your dollar doesn’t stretch as far, and your hard-earned savings start to lose value. It's frustrating, right? But here’s the silver—well, actually, golden—lining: some investments don’t just survive inflation; they thrive in it. That leads us to one of the oldest safe-haven assets known to humankind—gold.

In this article, we’re diving deep into the world of commodities and inflation, with a special spotlight on gold. Why does gold keep its luster when everything else seems to dull under inflation? Let’s break it down.

What Is Inflation, and Why Should You Care?

Before we jump into gold and commodities, let’s lay some groundwork.

Inflation is basically the rise in prices over time. When you were a kid, maybe a candy bar cost 50 cents. Now? It’s two bucks. That's inflation in action. While a little bit of inflation is normal and even healthy for the economy, too much can erode the purchasing power of your money.

So, if you're holding onto cash during times of high inflation, you’re essentially losing money. That’s where smart investing steps in—and commodities like gold enter the chat.

What Are Commodities Anyway?

Think of commodities as the raw materials that keep the world going. We’re talking about:

- Metals: Gold, silver, platinum
- Energy: Oil, natural gas
- Agriculture: Wheat, corn, soybeans
- Livestock: Cattle, hogs

These are standardized, interchangeable goods used across the globe. When inflation rises, commodities often go up in price, too. Why? Because they have intrinsic value, and they’re tied closely to supply and demand.

But among all commodities, gold stands out like the MVP. Why? Keep reading.

Gold vs. Inflation: A Century-Old Rivalry

Gold has been viewed as a store of value for thousands of years. Ancient civilizations used it as money, and it still sits in central banks’ vaults today. But why does it hold up so well during inflation?

1. Gold Isn't Tied to Any Currency

When inflation hits, a country’s currency weakens. But gold? It’s universally recognized and valued. It doesn’t matter what’s happening with the dollar, euro, or yen—gold marches to the beat of its own shiny drum.

For example, if the U.S. dollar loses value, it takes more dollars to buy the same amount of gold. So, gold prices go up, protecting your purchasing power.

2. Gold Is Scarce—and That’s a Good Thing

Unlike paper money, you can’t just print more gold. It has to be mined, refined, and stored. Its limited supply adds to its appeal. Scarcity often boosts demand, especially when times get tough.

Think about it this way: If everyone’s rushing to buy something that there’s only a little of—what happens? Prices soar. That’s what often happens with gold in inflationary climates.

3. Gold Is a Safe-Haven Asset

When the market gets rocky, investors flee to safety. Gold is like the financial version of comfort food. It’s reliable, familiar, and stable. During inflationary periods, or when there’s economic uncertainty, people pour money into gold to preserve their wealth.

History Doesn’t Lie: Gold’s Track Record During Inflation

Let’s take a quick walk down memory lane and look at how gold has performed during past inflationary periods.

1970s: The Original Gold Rush (Sort Of)

The 1970s were a wild ride. Oil prices skyrocketed, the U.S. was dealing with stagflation (a nasty combo of inflation and stagnant growth), and the dollar was in trouble. What did gold do?

It soared. Gold jumped from around $35 an ounce in 1971 to over $800 an ounce by 1980. That’s more than 20x growth in less than a decade. Not too shabby, right?

2008 Financial Crisis

While inflation wasn’t massive during the 2008 meltdown, there was a lot of fear around currency devaluation. Guess what happened again? Yep, gold performed well—rising from about $800 an ounce in 2008 to almost $1,900 in 2011.

2020 and Beyond

In recent years, with governments printing trillions in stimulus during the COVID-19 pandemic, inflation has crept back into the picture. And surprise, surprise—gold hit new highs in 2020 and remained strong throughout 2021 and beyond.

Other Commodities That Benefit from Inflation

While gold takes much of the spotlight, it’s not the only commodity that likes inflation. Here are a few others you might want to keep on your radar:

Oil and Energy

As the cost of goods rises, so does the cost of energy. Crude oil, in particular, tends to climb in inflationary times due to increased production costs and geopolitical uncertainty.

Industrial Metals

Metals like copper and aluminum usually see increased demand when inflation is tied to economic growth or infrastructure spending.

Agricultural Commodities

Inflation hits food prices hard. Wheat, corn, and soybeans often rise in tandem with broader inflation, especially when supply chains get disrupted.

How to Invest in Gold (Without Buying a Giant Gold Bar)

Want to add gold to your portfolio but not sure how? Good news—you don’t need a vault in your basement.

1. Physical Gold

This includes coins, bars, and bullion. It’s tangible and gives you full control. Downsides? It can be a pain to store and insure.

2. Gold ETFs

These are exchange-traded funds that track the price of gold. Super convenient and easy to trade like a stock.

3. Gold Mining Stocks

Want more upside potential? Consider investing in companies that mine for gold. Just keep in mind, they come with extra risk because you’re investing in the business—not just the metal.

4. Mutual Funds and Index Funds

Some funds are gold-heavy or include a mix of precious metals. It’s a more diversified approach.

Is Now a Good Time to Buy Gold?

You might be wondering: “Should I jump into gold right now?” Here’s the deal—no one can perfectly time the market.

However, if inflation is on the rise and your portfolio is heavy on cash or traditional assets, gold can be a solid hedge. It's not about going all-in, but rather adding some balance to your financial game plan.

Pros and Cons of Investing in Gold During Inflation

Let’s weigh it out—because every investment has its ups and downs.

✅ Pros:

- Hedge against inflation
- Universal store of value
- Low correlation with stocks and bonds
- Long history of performance

❌ Cons:

- Doesn’t generate income (no dividends or interest)
- Can be volatile short-term
- Storage and insurance hassles (if buying physical gold)
- Prices influenced by more than just inflation (like central bank policies and global demand)

Pro Tips for Using Gold as an Inflation Hedge

Alright, so you’re thinking about adding some gold to your portfolio. Here are a few tips to keep in your back pocket:

- 🟡 Don’t put all your eggs in one golden basket. Diversification is key.
- 🟡 Use gold as a hedge, not a replacement. It’s meant to protect, not outperform.
- 🟡 Watch the market sentiment. Gold often moves based on fear, not just fundamentals.
- 🟡 Set clear goals. Are you hedging inflation or looking for growth? Know your “why.”

The Bottom Line: Gold Still Shines Bright

Inflation isn’t going anywhere—it’s part of economic cycles. But just because the value of your money is slipping doesn’t mean your entire portfolio has to. Gold’s historical resilience, universal recognition, and scarcity make it a favorite go-to during tough economic times.

While it’s not a one-size-fits-all solution, gold can be a powerful and practical tool in your inflation-fighting arsenal. Whether you’re just starting out or already investing, adding a little shine to your portfolio might not be such a bad idea.

After all, in a world that’s constantly changing, a little gold could be your financial constant.