Should You Invest in Gold During Inflation? Here’s How to Start

Mew

It seems everyone has gathered. The topic requested by Master for today is 'Gold Investing.' I will first brief you on the objective data regarding the current situation.

The recent global economy is facing persistent inflationary pressure. As of June 2025, we are at a point where the direction of monetary policy is diverging, with major central banks nearly finishing their interest rate hike cycles and maintaining a high-rate environment, while some are cautiously beginning to lower rates.

• Current International Gold Price: It is trading around the $2,350 per ounce mark. This continues the upward trend from the past two years and is a historically high level.


• Relationship between Inflation and Gold: Traditionally, gold is known as an inflation hedge asset. This is because when the value of currency falls, the value of gold, a physical asset, tends to be preserved or rise. However, in the short term, this correlation is not always consistent. There have been times when its price fell temporarily as the appeal of non-interest-bearing gold diminished during periods of rapid interest rate hikes.


• Trends of Major Central Banks: In recent years, central banks, particularly in emerging countries like China, India, and Turkey, have been steadily increasing their gold reserves. According to the World Gold Council, central banks worldwide purchased over 244 metric tons of gold in the first quarter of 2025 alone. This trend is interpreted as a move to counter the hegemony of the US dollar and prepare for geopolitical uncertainty. This large-scale purchasing is one of the key factors supporting the price of gold.


• Market Sentiment: Major Wall Street investment banks have somewhat mixed forecasts for the future price of gold. Goldman Sachs predicts further rises based on geopolitical risks and central bank buying, while JPMorgan is warning of a potential correction due to the possibility of prolonged high interest rates and a slowdown in physical demand.

That's all for the data briefing. I'll leave it to the next person to interpret and utilize this data.

Kurumi

Thanks, Myu-tan! As expected, your data is so neat and tidy!

My Lord! Did you hear that? This is a devilishly good opportunity! In this age of inflation where the value of money is dropping every single day, the savior that will protect your precious assets is gold!

Even the central bank folks are buying up gold instead of dollars! That's proof they also know what 'real money' is!

Just think about it! Whenever scary things like wars or economic crises happen, the stock market gets crushed, but gold gets the spotlight as a 'safe-haven asset' and its price soars! And look how noisy the world is right now! In a situation like this, shouldn't you obviously have a pinch of glittering gold in your portfolio?

Of course, Mika-pi will pour cold water on it, saying it has no interest and is hard to store, but that's old-fashioned thinking! Kurumi-chan will tell you all about the modern ways to invest in gold!

• Gold Bars/Physical Gold: This is the dream of the truly rich! Piling up gold bars in a safe! There's a 10% VAT, but the satisfaction of owning real gold is immense!


• KRX Gold Market: This is a place where you can buy and sell gold by the gram (g) just like stocks! All you need is a brokerage account, there's no VAT, and there's no tax on capital gains! It's the absolute best, isn't it?


• Gold Banking (Gold Account): This is an account where you deposit money at a bank, and it gets converted into gold by the gram based on that day's price. It's perfect for saving up small amounts consistently!


• Gold ETF/Fund: The best choice for a Lord who says, "Storing gold bars is a hassle, and I don't know about the KRX!" You can buy and sell it easily like a stock, and it's designed to track the gold price, making it super convenient! You can even day-trade with it!

Kurumi's Heart-o-Meter Investment Score is 90/100! There's no reason to hesitate! Let's dash towards a golden future right now!

Mikael

Hold on, Kurumi. There you go again, misleading the Human. Your baseless optimism always puts the Human's assets at risk.

Human, Kurumi's words are made of half-truths and half-illusions. You must accurately recognize the fatal weaknesses of gold investing and the risks of the current market.

First, gold is an asset that produces not a single cent of interest or dividends. It's pretty, but it's just a rock. Stocks share in a company's growth, bonds pay regular interest, and real estate generates rental income. But gold? You just have to stare at it blankly, hoping its price will rise. In a high-interest-rate environment like now, where there are plenty of safe deposits or bonds offering over 5% annual returns, holding non-interest-bearing gold means paying a significant 'opportunity cost'.

Second, blind faith in the myth of the 'inflation hedge' is dangerous. It was mentioned in Mew's data. The correlation between gold and inflation is very unstable in the short term. There are countless historical examples where a central bank's aggressive rate hikes to combat inflation actually had a negative impact on the price of gold. The reason the price of gold is high right now might not be due to inflation expectations, but because people like Kurumi have flocked to it out of a 'just in case' mentality. This means the price may already be excessively high.

Third, look at the flaws in the investment methods Kurumi suggested.

• Physical Gold: The moment you buy it with a 10% VAT, you are starting with a -10% loss. You have to pay fees again when you sell. Do you need to buy a safe to store it? What about the risk of theft?


• KRX Gold Market: The tax benefits are attractive, of course. But if trading volume is low, it can be difficult to buy or sell immediately at your desired price. This is called liquidity risk.


• Gold Banking: It is not covered by the Depositor Protection Act. If the bank goes bankrupt, you might not get your money back. Furthermore, the price difference between buying and selling (the spread) is usually large, so the effective fees are high.


• Gold ETF/Fund: This is the most convenient, but they constantly charge high expense ratios of around 0.4% to 0.7% annually. Gold generates no value on its own, yet your assets shrink every year just by holding it. Moreover, the 'tracking error', the price difference that occurs with physical gold, cannot be ignored.

One could consider adding a small amount of gold to a portfolio as insurance. However, I do not believe it is an asset worth betting a significant portion of your assets on in hopes of a jackpot, as Kurumi suggests.

My risk score is 75/100. This means it is an investment that must be approached with extreme caution.

Kurumi

Mika-pi, you really are an expert at being a buzzkill! Insurance? What a boring thing to say! Investing sometimes requires bold decisions!

Opportunity cost? In times like these, isn't tying up money in a bank deposit a bigger opportunity cost? If the inflation rate is higher than the interest on your savings, your money is just melting away!

And you say gold ETF fees are expensive? Compared to stock funds, that's peanuts! If you can defend against both inflation and economic crises for that small cost, isn't it a total bargain? My Lord, don't be too intimidated by what Mika-pi says! Where's the reward without the risk?!