Although the most violent months of inflation increases in the developed world seem to be behind us, there are still countries where the rising costs of essential goods are threatening the local economies and people. Moreover, many economists are predicting higher inflation rates in the upcoming months coming back to the US and other nations, especially with winter approaching us.
With the declining purchasing power of (almost) all fiat currencies, one may wonder what they can do to preserve at least some of their wealth. Well, there are numerous investment assets that can do that, according to ChatGPT.
Traditional Safe Havens
When it comes down to traditional investment assets that can serve as a hedge against inflation, the word ‘gold’ tends to pop up. As such, it’s no surprise that the popular AI chatbot placed the precious metal at the first spot of the eight investment asset classes that can protect people against galloping inflation.
“Gold has been used for centuries as a store of value and a hedge against inflation. It tends to retain its value over time, and its price often rises when inflation is high.”
Shortly after the yellow metal, ChatGPT placed real estate. It justified its reasoning by saying, “As the cost of living increases, so do rents, potentially providing a steady stream of income.”
Next on the traditional list of safe havens, the chatbot placed US government bonds. Most specifically, it outlined – Treasury Inflation-Protected Securities (TIPS) – which are “designed to protect against inflation. They adjust with changes in the Consumer Price Index (CPI) and provide a guaranteed return above inflation.”
The last on this particular list was a bit less traditional – stocks. Now, this asset class is a lot more volatile and riskier than the ones mentioned above. However, ChatGPT believes stocks can be a proper long-term investment against inflation since “companies often have the ability to increase prices to keep up with inflation, and their profits can grow in nominal terms.”
Not So Traditional Assets
The rest of ChatGPT’s alternatives could be classified under the “dark horse” category since they are not as expected as the ones from above.
Firstly, it highlighted a broader category of commodities. Some of them are to be expected – such as other precious metals like silver, but the rest are less traditional – oil and agricultural products, as their prices “tend to rise with inflation.”
ChatGPT marked collectibles such as rare coins and art next on the list. This is because they have the potential to “retail value or appreciate over time.”
Foreign currencies are also mentioned by the chatbot. This is a particularly compelling one since some currencies tend to perform better in such conditions, like the Swiss franc. During the pandemic, for example, the different strategies undertaken by the global superpowers resulted in alternative consequences for their local currencies.
Last but certainly not least, ChatGPT pointed out cryptocurrencies, and more specifically, bitcoin. More on the matter of how BTC performs against gold in terms of a hedge against inflation can be found here.
The primary cryptocurrency’s entire nature is designed to mimic gold to an extent but also take the metal’s characteristics to another level because of the proven scarcity and digital existence. Nevertheless, bitcoin is still a relatively new concept that has to prove itself, which is why ChatGPT highlighted the potential risks when dealing with it.
“Some people consider cryptocurrencies like Bitcoin to be a hedge against inflation due to their limited supply and decentralized nature. However, it’s important to note that cryptocurrencies can be highly volatile and speculative.”
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