Anything but gold. The golden constant revisited

This paper revisits the golden constant - the gold property of keeping a constant purchasing power - via a comparison with a set of 17 commodities (energy, metals, agricultural products). We first use graphical devices of the CPI-deflated commodity prices, then stationarity tests designed to assess how fast the real prices of the commodities revert to their “constant” and, finally, measurements of their convergence speed. We find that the real price of gold is far from a constant, farther than the real price of most other commodities. We also note that the mean reversion of gold real price to its constant/average is weaker and slower than for most other commodities. These findings suggest that most commodities do a better job than gold when it comes to keeping a constant purchasing power. A portfolio of commodities would provide a liquidity similar to gold, while offering to investors a more stable protection against inflation.