At this point in time, inflation remains very low in developed industrial countries. By contrast, in developing countries, the rate of inflation is high, thus making gold the best hedging asset to protect one's savings from devaluation.
Gold is the best protection from hidden losses of value – that is, inflation, which gradually and imperceptibly eats away the purchasing power of paper money. In other words, when the amount of money in circulation grows while the supply of goods and services doesn't, the buying power of money decreases, giving rise to inflation.
When inflation exceeds banks' deposit interest rates, people's real assets slowly dwindle away. However, at the same time, the real value of debt also decreases. Since governments are the main debtors, they can look favorably at higher rates of inflation.
Official inflation in developed countries has been low for many years. For instance, in the US, it's estimated at only 2.3% a year. The inflow of money into the country's financial market led to a sharp growth in stock and real estate prices, while consumer prices remained virtually unchanged. Even if the authorities adjust the inflation data slightly to make it look better, the rate is still low – for several reasons.
First, in order for the prices to start growing, there should be a deficit in consumer goods. Nowadays you can easily procure any good: markets are very well supplied. Easy online price discovery and high competition in retail keep pushing the prices down. Globalization plays a role as well.
The situation is very different in developing countries, where inflation rates keep growing due to product deficits. These countries often depend on foreign imports, especially in the case of food and drugs. Financial authorities in these nations keep on printing money as a short-term solution. This leads to a constant decline in their national currencies' buying power and an increase in local gold prices.
Here is a list of countries with particularly high inflation rates:
Venezuela - 3.9113,80%
Zimbabwe - 521,20%
South Sudan - 170,50%
Sudan - 57,70%
Argentina - 51,40%
Liberia - 30,90%
Iran - 27,80%
In these nations, people who own gold can protect their wealth from inflation-based consumption. By contrast, those who hoard cash money are doomed to bankruptcy.
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