An Appraisal: Unusual Inflation Spurs Search for Different Hedges
When stock market investors hear the word inflation, they run for cover -- and often they can find refuge right in their own backyard.</br></br>Investors have been hearing about inflation a lot lately, and they heard still more Friday. The Labor Department said the consumer price index, a closely watched barometer of inflation, rose 0.4% in March, or at a compound annual rate of 5.1%. Last year, the consumer price index rose just 1.1%.</br></br>Friday's report only confirmed the accelerating inflation some stock market investors were anticipating a while ago when they jumped into gold stocks, traditional hedges against inflation. But those investors also bid up the average price-earnings ratio of North American gold issues above 50. So, investors who cower at the thought of rising inflation will have to pay dearly if they take refuge in gold.</br></br>Although some analysts aren't sure the gold stocks are a particularly smart anti-inflation bet at their current prices, the analysts are also uncertain about where else investors can find a haven from inflation.</br></br>Traditionally, precious metals and commodities have been safe places to park money during inflationary periods. But, some analysts say, today's inflation is different from what has come before because it stems from the falling dollar rather than an overheating economy.