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Gold Is a Bad Inflation Hedge—Like Oil: Stock Picker

Gold prices hit a record high Thursday at above $1,120. But in today’s dollars and on an inflation-adjusted basis, the precious metal is still 50 percent off its record high. So should investors still be piling into the commodity? Brent Wilsey, president at Wilsey Asset Management, shared his insights.

“It’s not a good inflation hedge,” Wilsey told CNBC. “It hasn’t proved to be that way and it reminds me of oil prices [at $140 a barrel] not too long ago…the same thing’s going to happen with gold here.”

Wilsey said he wouldn't necessarily buy the gold metal, but suggested investors look at stocks of companies that trade in gold, such as Cash America and EZCorp.

“These companies will benefit from the sales of gold," he said.

"These two companies have very strong earnings—you’re paying about 8 to 9 times forward earnings, sales are up, balance sheets are very strong—a very good way to play gold. And even if gold goes down, you’re still left with a company that has sales and earnings that will bring you back up again.”

Wilsey also recommended mining companies such as Newmont Mining, which trades at around 18 times earnings.

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Disclosures:

No immediate information was available for Wilsey or his firm.

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