Gold vs. inflation: Opened-ended QE is causing some investors to worry that inflation will get out of hand. That has helped drive gold prices higher, as investors look for places to hedge against a potential rise in inflation. As the nearby charts illustrate, the link between inflation and gold is very limited. First, gold is not part of the CPI bundle, so a movement in gold will not impact inflation. Second, gold is not a good predictor of inflation. As the nearby charts illustrate, gold prices are much more volatile than headline inflation. Finally, with the correlation between gold and inflation on a yoy basis of just 0.42 and on a month-over-month basis of 0.11, gold is not a great hedge against inflation.
Source: BofA ML