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Gold Is Losing Its Status as an Inflation Hedge, Two Traders Warn

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Gold's reputation as a reliable hedge against inflation is at risk as investors find other areas of the market where they can hide out from rising prices, two traders say.

"I think investors need to think about it differently," Laffer Tengler Investments' Nancy Tengler told CNBC's "Trading Nation" on Friday.

The precious metal hasn't produced a positive return during periods of consistent inflation since the 1970s, the firm's chief investment officer said, citing data from Morningstar Direct.

Since the Labor Department reported that inflation climbed at the highest year-over-year rate since 1982 in November, gold has only risen by about 1%, she added.

"This year, you've seen the inflation hedge really being in the [real estate investment trust] and real estate ... segment of the market as well as stocks in general," Tengler said.

"If the dollar continues to weaken, gold should get a move, but a number of the other metals may actually be better places to play because there's a narrative behind those in terms of planetary decarbonization [and] green energy," she said.

The only trend against which gold might prove a successful hedge is the U.S. printing too much money, Piper Sandler senior technical research analyst Craig Johnson said in the same interview.

He pointed to gold's decline relative to breakeven five-year inflation rates, bitcoin and REITs since the start of 2020.

"I don't think it's a great hedge at this point in time and frankly, bitcoin would look better or real estate from my perspective," Johnson said.

He added that $1,850 will be a key level to watch as gold prices consolidate. They fell by less than half of 1% to around $1,797 on Monday as omicron risks continued to concern investors.

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