The often-heard term 'inflation' is the rate at which prices of goods and services rise. It eats away the future purchasing power of the wealth you create painstakingly through meticulous investments.

If you find it difficult to meet your monthly expenditure, blame it on the inflation monster. Gold and realty were often considered a good hedge against inflation. The inflation-adjusted returns from gold have been spectacular over the last few years.

You can invest in physical gold in the form of bars, coins or jewelry. Gold exchange-traded funds are equivalent to investing in gold and easy to liquidate. Undeniably, gold is an excellent way to diversify your portfolio and is useful in times of high inflation to protect wealth. However, while it requires no additional maintenance expense, it doesn't generate any periodic interest payouts. Unlike silver that has extensive industrial applications , gold is more often preferred in physical form. People have an emotional bonding to the metal. They usually keep it safe for the next generation and for times of financial crisis.

Will the uphill climb of gold prices continue? The fluctuations in oil price and strength of the US dollar have affected gold prices. An increased demand for gold, especially before the festival and marriage seasons , pushes its price upwards. Gold is pegged to the US dollar and has an inverse relationship with the dollar. In the event of a financial or economic turmoil in the US, the dollar could weaken against many other currencies, sending the gold price upwards. Political turmoil across the globe could send the gold price upwards too.

Will the price of gold go up higher? Or will it stagnate at the current levels? Analysts advise the riskaverse not to invest more than 10 percent of the portfolio in gold at the current price level. While the benefits of diversification may be real, the associated risk is high too. Those with a low or medium threshold for risk should look at other safer options such as fixed deposits that are yielding lucrative double-digit returns.