While the most severe inflation spikes in developed nations may be receding, several countries still grapple with the economic threats posed by rising essential commodity costs. Furthermore, many economists are anticipating an uptick in inflation rates, particularly in the US and other regions, as winter approaches.
Given the diminishing purchasing power of most fiat currencies, individuals may be pondering ways to safeguard a portion of their wealth. ChatGPT has identified numerous investment assets that can serve this purpose.
Traditional Safe Havens When considering traditional investment assets that can act as hedges against inflation, the term ‘gold’ invariably comes to mind. Unsurprisingly, ChatGPT has positioned this precious metal at the top of its list of eight investment asset classes for safeguarding against rampant inflation.
Gold has historically served as a store of value and a hedge against inflation. It often retains its value over time, with prices frequently surging during periods of high inflation. Following closely behind gold, ChatGPT has placed real estate on its list. The chatbot justifies this choice by noting, ‘As the cost of living rises, so do rents, potentially providing a steady income stream.’
Next in line among traditional safe havens, ChatGPT has mentioned US government bonds, specifically Treasury Inflation-Protected Securities (TIPS). These bonds are tailored to guard against inflation by adjusting in line with changes in the Consumer Price Index (CPI) while ensuring a return above the inflation rate.
The final entry in this category, although somewhat less conventional, is stocks. While stocks are more volatile and riskier compared to the aforementioned assets, ChatGPT believes they can serve as a suitable long-term investment against inflation. This is because companies often have the ability to raise prices to keep pace with inflation, leading to nominal profit growth.
Unconventional Assets The remaining options identified by ChatGPT can be considered ‘dark horse’ selections, as they deviate from the expected choices.
First and foremost, it underscores a broader range of commodities, including other precious metals like silver, alongside less conventional options such as oil and agricultural products. These commodity prices often exhibit an upward trajectory during inflationary periods.
Collectibles, such as rare coins and art, are next on ChatGPT’s list. These assets hold the potential to either maintain or appreciate in value over time.
Foreign currencies also make an appearance on the chatbot’s roster. This choice is intriguing because certain currencies, like the Swiss franc, have demonstrated better performance under such economic conditions. During the pandemic, the varying strategies pursued by global superpowers yielded diverse outcomes for their respective local currencies.
Last but certainly not least, ChatGPT highlights cryptocurrencies, particularly Bitcoin. For an in-depth comparison of BTC’s performance as an inflation hedge against gold, refer to this article.
Bitcoin, the primary cryptocurrency, is designed to emulate gold to some extent while enhancing its characteristics due to proven scarcity and digital existence. Nonetheless, Bitcoin remains a relatively novel concept that must continue to validate its potential, prompting ChatGPT to underscore the associated risks in dealing with it.