Although the most violent months of inflation increases in the developed world appear to be over, there are still countries where rising commodity costs threaten local economies and people. Moreover, many economists expect inflation rates to rise in the coming months in the United States and other countries, especially as winter approaches.
With the purchasing power of (almost) all fiat currencies declining, one might wonder what they can do to preserve at least some of their wealth. Well, there are several investment assets that can do just that, according to ChatGPT.
Traditional safe havens
When it comes to traditional investment assets that can act as a hedge against inflation, the word “gold” tends to come up. As such, it is not surprising that the popular AI-powered chatbot placed the precious metal in first place among the eight investment asset classes that can protect people from accelerating inflation.
“Gold has been used for centuries as a store of value and a hedge against inflation. It tends to hold its value over time, and its price often rises when inflation is high.
Shortly after the yellow metal debuted, ChatGPT placed real estate. She justified her reasoning by saying: “As the cost of living rises, rents also rise, which may provide a steady stream of income.”
Next on the traditional list of safe havens, a chatbot placed US government bonds. More specifically, the report explained that Treasury inflation-protected securities are designed to protect against inflation. They adjust to changes in the Consumer Price Index (CPI) and provide a guaranteed return above inflation.
The last on this particular list was a little less traditional – stocks. Now, this asset class has become more volatile and riskier than the ones mentioned above. However, ChatGPT believes that stocks can be a suitable long-term inflation-proof investment since “companies often have the ability to increase prices to keep up with inflation, and their profits can grow in nominal terms.”
Not traditional assets
The rest of the ChatGPT alternatives can be classified under the “dark horse” category since they are not as predictable as the alternatives mentioned above.
First, it highlights a broader category of commodities. Some are expected – such as other precious metals such as silver, but the rest are less conventional – oil and agricultural products, as their prices “tend to rise with inflation”.
ChatGPT has tagged collectibles such as rare coins and artwork in the following list. This is because they have the ability to “retail value or appreciate over time.”
Foreign currencies are also mentioned by the chatbot. This is particularly compelling given that some currencies tend to perform better in such conditions, such as the Swiss franc. During the pandemic, for example, various strategies implemented by global superpowers have led to adverse consequences for their domestic currencies.
Last but not least, ChatGPT made a reference to cryptocurrencies, more specifically, Bitcoin. More on how BTC performs against gold in terms of inflation hedging can be found here.
The entire nature of the underlying cryptocurrency is designed to mimic gold to some extent, but it also takes the properties of the metal to another level due to its proven scarcity and digital presence. However, Bitcoin is still a relatively new concept that has to prove itself, which is why ChatGPT has highlighted the potential risks when dealing with it.
“Some people consider cryptocurrencies like Bitcoin a hedge against inflation due to their limited supply and decentralized nature. However, it is important to note that cryptocurrencies can be highly volatile and speculative.
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