Comparative Analysis of Gold, Art, and Wheat as Inflation Hedges

Abstract

This study confirms gold’s role as a reliable inflation hedge while introducing new insights into lesser-explored assets like art and wheat. Using advanced methodologies such as the ARDL framework and LSTM deep learning, it conducts a detailed analysis of inflation-hedging dynamics, exploring non-linear relationships and unexpected inflation impacts across various asset classes. The findings reveal complex dynamics. Gold demonstrates strong long-term inflation hedging potential. The negative coefficient for the US dollar index suggests that gold acts as a hedge against currency depreciation. Furthermore, a positive relationship between gold returns and inflation during high inflation periods highlights its effectiveness in protecting purchasing power. Art presents a more intricate picture. Long-term analysis suggests a weak mean-reverting tendency, but a negative relationship with inflation, potentially linked to economic downturns. Interestingly, unexpected inflation positively correlates with art returns in the long run, hinting at its potential inflation-hedging abilities. No statistically significant connection between wheat prices and overall inflation was observed; the short-run analysis reveals a dynamic interplay between inflation, real GDP growth, and wheat prices at different time points.