Gold is often treated as a natural hedge against inflation, but analyst Patrick Karim argues that the relationship is much more complicated.
In a new chart shared on October 15, Karim compared the U.S. inflation rate with gold over multiple cycles going back to the late 1990s.
His main point is contrarian: rising inflation has not always been bullish for gold. In several previous cycles, gold performed better after inflation began falling.
What you'll learn 👉
Gold Has Often Bottomed When Inflation Broke Lower
Karim’s chart marks several periods where inflation rolled over and gold was near an important low.
He notes that in five of the last six examples on his chart, an inflation breakdown either coincided with or closely followed a gold bottom.
The pattern appears around periods including 2001, 2006, 2008, 2018 and 2022.
That challenges the simple assumption that investors should automatically buy gold when inflation starts rising.
Karim’s view is that the more favorable setup has often appeared after inflation pressure begins easing.
Rising Inflation Can Eventually Hurt Gold
The reason is tied to interest rates.
Higher inflation can initially support gold because the metal is often used as a store of value.
But if inflation becomes too strong, markets may expect tighter monetary policy, higher Treasury yields and stronger real yields.
That can become negative for gold because the metal does not pay interest.
Karim points to 2011 and 2022 as examples where inflation was already elevated and the gold price had begun to stall or top.
What Karim’s Chart Says About Gold Today
The current setup is interesting because inflation has started turning higher again after a period of decline.
At the same time, gold has already had a powerful run and recently traded above $4,000.
Karim’s warning is that if inflation keeps accelerating from here, the market may once again price in tighter Federal Reserve policy.
That could push bond yields higher and reduce the relative appeal of holding gold.
The chart does not prove that gold has already reached a long-term top.
But it does show why rising inflation should not automatically be treated as bullish.
Our Take
Karim’s chart is most useful as a reminder that gold responds to more than inflation alone.
Real yields, Treasury markets, the U.S. dollar, central-bank demand and broader liquidity conditions can all influence price.
If inflation rises but bond yields rise even faster, gold can struggle.
If inflation cools and yields fall, that can sometimes create a much friendlier environment for the metal.
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