Inflation is the main threat to the containment of purchasing power for everyone, bar none.

There are countries like Argentina, Turkey and African countries, where inflation is in double or triple digits, so the loss of the purchasing value of the currency is very fast. 

But even in developed countries like America and Europe, inflation hit hard, especially during the world wars and in the 1970s with the oil crisis. 

Figure 1: USD inflation since the creation of the Federal Reserve 

The Federal Reserve was founded in 1914, if I wanted to buy a flat back then I would have spent $23,000, today to buy the same flat I would need $1 million, this is the problem of inflation that people need to understand. 

Keeping money under the mattress or in a bank account is a bad strategy, because the more time passes, the less purchasing power I have for the same currency. 

Some might think that if I buy a flat, I am protecting myself against inflation, but in reality, history shows that real estate, except in very rare cases of properties in the historic centres of large cities, cannot fully protect against inflation, if only because such properties deteriorate and have significant maintenance costs. 

A so-called Hard Asset that protects against inflation is Gold, which has a unique characteristic, namely the transferability of value over the centuries. 

Figure 2: Gold price trend versus USD 

For many years, the price of gold was tied to the dollar, in a phase that lasted about 100 years called the Gold Standard, during which time gold suffered inflation because it was politically tied to something that was losing value, but this situation was not sustainable, not least because in order to maintain the Gold Standard, the assumption was that the US Federal Reserve would maintain an amount of gold equivalent to the amount of dollars in circulation, which was obviously much greater. 

Figure 3: Logarithmic scale protection of the value of Gold against the Dollar 

Ever since Nixon issued an executive order in 1971 to 'temporarily' disconnect the dollar with gold. Few people know that the motivation for the executive order, broadcast in a short televised speech, was that France, imagining that there was not enough gold to cover the dollars in circulation, asked the US to receive back gold bars in exchange for the dollars held by the French Central Bank. 

Once the value of gold has been disconnected from the dollar, the effects are there for all to see, and clearly visible in the chart above, where it can be seen that gold has regained its natural inclination to be considered an asset capable of translating value forward over time. 

And you? Do you have gold in your investment portfolio? If not, what's stopping you from introducing it? 

What is your inflation expectation for the next two years? And how do you plan to protect yourself?