Analysis of the possibility of hedging financial resources against inflation with investments in precious metals

This master's thesis analyzes the possibility of hedging financial resources against inflation through investments in precious metals, with a focus on gold. The aim of the thesis is to empirically verify whether gold, during the period of 2015–2024, fulfilled the role of an effective instrument for preserving the real value of capital for a Czech investor. The thesis is divided into a theoretical and a practical part. The theoretical part defines basic investment concepts, presents precious metals as investment assets, and analyzes the costs and tax aspects associated with investing. The practical part first uses a historical simulation study to evaluate the real-world performance of a regular investment in gold and silver after accounting for costs and inflation. Subsequently, it utilizes more advanced econometric methods, specifically correlation analysis and a vector autoregression (VAR) model, to examine the dynamic relationships between gold returns, the inflation rate, the value of the U.S. dollar, and market volatility. The results of the simulation show that although gold significantly outperformed inflation at the end of the ten-year horizon, its ability to cover inflation was variable throughout the period. Furthermore, the results of the VAR model did not confirm a statistically significant short-term reaction of gold to inflationary shocks. Conversely, the model revealed that past gold returns functioned as a statistically significant predictor of future inflation.