From Dow Jones & Company:



Colombia has long been troubled with high inflation rates, which have greatly impacted the exchange rate with the U.S. dollar, going from 6 pesos to 1 dollar in 1960 to 4,000 pesos to 1 dollar today. There is data available going back to 1993 on Colombian consumer price index, gold and the Colombian stock market in Colombian peso terms. While the chart does show assets that can help preserve purchasing power over the long term, it doesn’t extend to situations of outright hyperinflation.

Research shows that during hyperinflation gold typically performs poorly in inflation-adjusted terms. Both the Colombian stock market and gold have outperformed Colombian inflation over the past 30 years, with stocks performing better. However, over shorter-term periods, none of the major asset classes is a reliable inflation hedge. The ratio of gold to inflation is currently double the longer-term average, suggesting that gold may be overvalued and potentially poised to underperform.

Overall, the message of the chart is encouraging about finding assets that preserve your purchasing power over the long term in the wake of high inflation, but it is important to watch for situations of outright hyperinflation and short-term fluctuations.



Read more: 2 investments to protect your money when inflation spins out of control