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Chief Economist and Strategist Recommends Gold as Inflation Hedge

Dave Rosenberg, chief economist and strategist at Gluskin Sheff and Associates – one of Canada’s most renowned wealth management firms – thinks you should have gold in your investment portfolio, and here’s why.

Rosenberg, speaking with Kitco News, believes inflation will rise in the near future due to worldwide central banks such as the Federal Reserve and the European Central Bank no longer pushing policies that favor price stability. Instead, these banks are letting inflation run rampant in order to keep recovering economies above water.

Rosenberg says “Gold… as an inflation hedge does well during periods when policy rates are being held in negative territory in real terms, which [Federal Reserve chair] Janet Yellen seems to be foreshadowing.”

He continues, “You want to be careful about how much gold exposure you want to have, but you certainly want to have some as a buffer.” In other words, he advises that gold should not make up your entire portfolio but rather is a great diversifier for it.

Although the U.S. Labor Department said on April 15 that the consumer price index (CPI) increased 1.7% in March, below the Fed’s inflation target of 2.0%, Rosenberg thinks higher commodity prices, higher hourly wages, rising rent costs, and rising healthcare costs will all translate to higher inflation.

Rosenberg adds that although he does not see inflation and interest rates reaching double-digits anytime soon, he sees signs that prices have hit a bottom and therefore will be on the rise. He recommends investors go against central banks that are trying to promote growth by staving off deflation. He believes investors “should put down the bet that the central bank will be successful in creating a moderately higher inflationary environment.”

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