By Tim Courtney, Chief Investment Officer

Last week, we reviewed inflation over the last 67 years as well as its relationship with money supply and its diluting effect on investment returns. The economy has been growing at close to 3% annually,¹ but our supply of money has been growing at 6.7%.² That 3.7% gap³ has shown up as inflation and has reduced the real return of stocks to 6.95% annual and the real return of bonds to 2.33% annually⁴ – before taxes.

It is possible that new productivity or AI will restrain future inflation, at least for certain goods and services. But based on history, prudent planning would assume that inflation risk will continue, perhaps at levels above what may be considered normal (the Federal Reserve’s 2% target). To this end, many investors have looked to alternatives to hedge inflation risk. Gold and cryptocurrencies have increased in popularity as a potential answer to inflation and the fast-growing supply of dollars. But these assets – which we will call speculative assets since they, like the dollar, do not generate cash flows and have limited direct economic utility relative to productive assets – have their own set of problems.

Gold has a long track record and has served as a store of value over centuries.⁵ It has acted as a hedge against inflation over very long periods, but not smoothly. There are decades when gold runs well ahead of inflation followed by decades when its price stagnates while inflation marches higher.⁵ That kind of uneven, unpredictable behavior makes gold hard to rely on over the course of a 20 or 30 year retirement.⁶

As noted, gold is a speculative asset and worth only what someone else is willing to pay for it because, it does not generate cash flow. Warren Buffett has a helpful way of looking at gold. He noted that if you took all of the mined gold in the world and melted it down into a cube, it would measure about 70 feet on each side, fitting neatly within a baseball infield and now would be worth somewhere between $20 and $30 trillion.⁷ That cube would continue to sit there, day after day, producing nothing. But that same $20-$30 trillion invested in housing/real estate, energy creation, farm/timber land and companies generating net profits from the sale of goods and services would historically be associated with a much greater expected return.⁸

We can look at cryptocurrency in a similar way. Like gold, crypto does not generate cash flows. Similarly, it has had quite volatile and unpredictable price movements. In the last six months alone, Bitcoin moved from all time highs of over $126,000 late last year to levels below $65,000 in early 2026.⁷ Unlike gold, though, it lacks a long-term track record and has not been widely used as a medium of exchange.

This is not to say that investors should avoid these assets entirely. And we are sympathetic to those looking for a stable alternative to the increasing supply of dollars and the inflation they bring. But gold and cryptocurrency prices have not been stable, and just as we don’t recommend holding inordinate amounts of dollars (cash), we don’t recommend holding too much in unproductive, speculative assets. Rather, most portfolios need to hold assets that are productive, either cash flowing or usable, and support a family’s future standard of living.

Sources:

1. World Bank Group (data as of 4/15/26) – GDP Growth (annual %) - United States
2. FRED (data as of 4/15/26) – M2 (M2SL)
3. FRED (data as of 4/15/26) – Inflation, consumer prices for the United States
4. DFA Returns (data from 1/1/1959-12/31/2025) Fama French Total US Market Research Index, Dimensional US 20 Year Treasury Index, US Consumer Price Index.
5. Investopedia (10/18/25) – Gold Price History: Highs and Lows
6. CNBC.com (6/8/21) – Gold as an inflation hedge? History suggests otherwise
7. Callan Institute (2/2/2026) – The Opportunity Cost of a Really Big Gold Cube
8. Berkshire Hathaway (2/25/12) – Shareholder Letter
9. Yahoo! Finance (data as of 4/15/26) – Bitcoin USD Price

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