Gold and Inflation: a Critical Examination of Wealth Preservation by Investing in Gold

Paper's objective(s) and research backgroundThis article discusses the relationship between Slovakia's inflation rate and the market price of gold.Almost 23-year span is examined, starting from January 2000 and ending on August 2023.The paper points to gold's capacity to protect wealth against inflation-related asset depreciation. Data/MethodsNumerous parameters, including the average yearly return and the difference in the Slovak currency's purchasing power, were computed in order to get at the results.Additionally, correlation analysis was applied.The World Bank and the Slovak Republic's Statistical Office's websites provided the data. Results/Conclusions/Value addedA very weak but statistically significant indirect correlation is shown between Slovakia's inflation rate and gold prices (value of -0.18), and strong indirect correlation (value of -0.845) between the market price of gold and the buying power of the national currency.Throughout the examined time, Slovakia's average annual inflation rate was just 4.23%, but the average arithmetic annual return for gold was 9.71%.Based on these findings as well, it is feasible to claim that gold in Slovakia during the past two decades has successfully served as an inflation hedge and contributed to the preservation of wealth.