Historically, gold and silver has been an excellent hedge against inflation, because its price tends to rise when the cost of living increases. Over the past 50 years, investors have seen gold and silver prices soar and the stock market plunge during high-inflation years. This is because when currency loses its purchasing power to inflation, gold or silver tends to be priced in those currency units and thus tends to rise along with everything else priced in that currency. Additionally, gold and silver is seen as a good store of value so people tend to be encouraged to buy gold when they believe that their currency is losing value.
